0001023175-01-500269.txt : 20011101 0001023175-01-500269.hdr.sgml : 20011101 ACCESSION NUMBER: 0001023175-01-500269 CONFORMED SUBMISSION TYPE: SB-2 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20011030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDI HUT CO INC CENTRAL INDEX KEY: 0001093285 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 222436721 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SB-2 SEC ACT: 1933 Act SEC FILE NUMBER: 333-72504 FILM NUMBER: 1770997 BUSINESS ADDRESS: STREET 1: 1935 SWARTHMORE AVENUE CITY: LAKEWOOD STATE: NJ ZIP: 08701 BUSINESS PHONE: 7329010606 SB-2 1 medsb2.txt As filed with the Securities and Exchange Commission on October 30, 2001 Registration No.333- ============================================================================== U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Form SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 MEDI-HUT CO., INC. (Name of issuer in its charter) Delaware 5122 222-436-721 (State of incorporation) (Primary Standard Industrial (I.R.S. Employer Classification Code Number) Identification No.) 1935 Swarthmore Ave. Lakewood, New Jersey 08701 (732) 901-0606 (Address and telephone number of registrant's principal executive offices and principal place of business) ____________________________________ Joseph A. Sanpietro, President 1935 Swarthmore Ave. Lakewood, New Jersey 08701 (732) 901-0606 (Name, address and telephone number of agent for service) _______________________________ Copies to: Cindy Shy, Attorney Cindy Shy, P.C. 525 South 300 East Salt Lake City, Utah 84111 (801) 323-2392 Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] CALCULATION OF REGISTRATION FEE ------------------------------------------------------------------------------ Proposed Proposed Title of Each Maximum Maximum Class of Amount Offering Aggregate Amount of Securities to To be Price Per Offering Registration be Registered Registered (1) Unit (2) Price Fee ---------------- ------------------- ------------ ------------- -------------- Common Stock 1,850,000 $ 8.20 $ 15,170,000 $ 3,792.50 ------------------------------------------------------------------------------ (1) This registration statement covers the resale by certain selling stockholders of up to an aggregate of 1,850,000 shares of the registrant's common stock, par value $0.001. Of the aggregate amount, 1,250,000 shares are owned by the selling stockholders and 600,000 shares may be acquired by a certain selling stockholder upon the exercise of warrants. In order to prevent dilution, if there is a stock split, stock dividend or similar transaction involving the registrant's common stock, the number of shares registered hereunder will automatically be increased to cover the additional shares in accordance with Rule 416(a) under the Securities Act. (2) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c) under the Securities Act, based on the average of the bid and asked prices of the registrant's common stock as of October 25, 2001. Medi-Hut hereby amends the registration statement on such date or dates as may be necessary to delay its effective date until we shall file a further amendment which specifically states that this registration statement shall become effective in accordance with Section 8(a) of the Securities Acts of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine. PROSPECTUS ---------------------------------------------------------------------------- | SUBJECT TO COMPLETION | | | | The information in this prospectus is not complete and may be changed. | | We may not sell these securities until the registration statement filed | | with the Securities and Exchange Commission is effective. This prospectus| | is not an offer to sell these securities and it is not soliciting an | | offer to buy these securities in any state where the offer or sale is not | | permitted. | ---------------------------------------------------------------------------- MEDI-HUT CO., INC. a Delaware corporation 1,850,000 shares of common stock, par value $.001 -------------------------- ------------------------------- | | Of the 1,850,000 shares of common stock | Trading Symbol | offered hereby, 1,250,000 shares are | | outstanding shares owned by the | Nasdaq SmallCap Market | shareholders and 600,000 shares will be | "MHUT" | acquired by a selling stockholder upon | | exercise of warrants. The selling | High bid and low asked | stockholders are identified in this | prices as reported by | prospectus under "Selling Stockholders," | NASDAQ Trading and | on page 23 | Market Services on | | October 25, 2001: | We will not receive the proceeds from the | $ 8.56 and $ 8.60, | resale of the 1,850,000 common shares sold | respectively | by the selling stockholders. We will ------------------------------- receive the exercise price of the warrants, which may result in proceeds up to $4,050,000 if the selling stockholder exercises all warrants. Investing in the common stock involves a high degree of risk. See "Risk Factors" beginning on page 4. ______________ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. __________________ Prospectus dated October 29, 2001 TABLE OF CONTENTS Prospectus Summary........................................................ 3 Risk Factors.............................................................. 4 Use of Proceeds........................................................... 6 Market For Common Equity.................................................. 6 Management's Discussion And Analysis...................................... 8 Business.................................................................. 13 Property.................................................................. 18 Legal Proceedings......................................................... 18 Management................................................................ 19 Principal Stockholders.................................................... 21 Selling Stockholders...................................................... 23 Description of Securities................................................. 23 Plan of Distribution...................................................... 25 Interest of Named Experts And Counsel..................................... 25 Commission's Position on Indemnification For Securities Act Liability..... 26 Available Additional Information.......................................... 26 Changes In And Disagreements With Accountants............................. 26 Index to Financial Statements............................................. 27 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE Medi-Hut has filed this a registration statement on Form SB-2 to register the Medi-Hut common stock to be sold by the selling stockholders. As allowed by the Securities and Exchange Commission ("SEC") rules and regulations, this prospectus does not contain all the information provided in the registration statement. That information is available without charge to you upon written or oral request. In addition, Medi-Hut undertakes to respond to requests for the information within one business day of receipt of the request. Medi-Hut will send the copies of the document by first class mail or other equally prompt means. You must address your request to: Investor Relations Medi-Hut Co., Inc. 1935 Swarthmore Ave. Lakewood, New Jersey 08701 ------------------------- 2 PROSPECTUS SUMMARY Medi-Hut Co., Inc. 1935 Swarthmore Ave. Lakewood, New Jersey 08701 (732) 901-0606 The Company. We wholesale name brand drugs, medical products, our Elite Safety Syringe, our "Elite" brand private label medical products and our "Tru-Choice" over-the-counter drugs. These products are provided to us by various suppliers and we sell these products through drug wholesalers who then sell the products to pharmacies and through mail order. We plan to expand our operations to include manufacturing of our 3cc Elite Safety Syringe within the next ninety (90) days. Further discussions of our business and operations can be found in the "Management's Discussion and Analysis" starting on page 8 and the "Business" section starting on page 13. The following table sets forth certain selected financial data of Medi-Hut for the nine month period ended July 31, 2001, and the fiscal years ended October 31, 2000 and 1999. We have funded our cash requirements primarily through revenues and sales of our common stock. We have required little short term debt financing and management expects that the capital raised by recent private placements will satisfy our present requirements for working capital and capital expenditures for the next twelve months. The information contained in the following table should be read in conjunction with the "Management's Discussion and Analysis" starting on page 8 and the historical financial statements and related notes included elsewhere in this prospectus. Nine Month Period Ended Year ended October 31, Operations July 31, 2001 2000 1999 ---------- ------------- ------------- ------------- Net sales $ 7,285,362 $ 8,130,696 $ 4,758,268 Gross profit 1,047,511 734,353 490,905 Total operating expenses 535,378 498,835 581,346 Net income (loss) 350,827 235,000 (87,186) Net (loss) per common share 0.03 0.02 (0.01) Financial Position ------------------ Current assets $ 5,523,541 $ 2,908,632 $ 1,812,701 Current liabilities 1,934,136 2,016,444 477,594 Total assets 7,475,318 3,572,298 1,839,200 Stockholders equity 5,541,182 1,555,854 1,361,606 The Offering. Medi-Hut is registering for resale an aggregate of 1,850,000 common shares as a result of certain agreements with certain selling stockholders. Pursuant to a registration rights agreement between Medi-Hut and Empire Fund Managers, LLC, we are registering 1,200,000 common shares related to units sold in a private placement. We are also registering another 275,000 shares pursuant to "piggy back" registration rights related to a private placement we started in September 2001. In addition, we are registering 375,000 common shares held by our management. Of the 1,850,000 total shares being registered, 600,000 shares are underlying common shares for warrants granted to Empire Fund (See, "Selling Stockholders - Transactions Related to the Offering," starting on page 24.) We will not receive any of the proceeds from the resale of the 1,850,000 shares which are being registered. These shares will be sold from time to time and at the total discretion of the selling stockholders. See, the "Plan of Distribution" starting on page 25 for further details on the rights of the selling stockholders in regards to the manner of any sales. We may receive proceeds from the exercise of any and all of the 600,000 warrants. If all of the warrants are exercised we may receive proceeds of approximately $4,050,000. We intend to use these proceeds for 3 working capital. Shares of common stock offered by selling stockholders 1,850,000 Common stock outstanding after the offering 15,033,800 Common stock owned by selling stockholders after the offering 3,255,200 RISK FACTORS Potential investors should carefully consider the following risk factors before deciding to buy our common stock. Each investor should also consider the other information in this prospectus. If any of the following risks actually occur, our business, financial condition, operating results or cash flows, could be materially adversely affected. This could cause the trading price of our common stock to decline, and the investor may lose part of or all of the investment. RISKS RELATED TO OUR BUSINESS We have recorded net income in our most recent fiscal year, but consistently incurred net losses in prior years. We recorded a net income of $235,000 for fiscal year 2000; however, we had posted net losses for previous years. We have financed ourselves through revenues, loans and sales of our common stock. Our quarterly results could fluctuate and we cannot be certain that future results will be similar to past results. We do not believe that period-to-period comparisons of our results of operations will necessarily provide investors with meaningful data for the foreseeable future because of variations in our operations. We recently acquired and consolidated operations with our wholly owned subsidiary which has resulted in restated financial statements that reflect the consolidation. Our operating results in the future may vary significantly, depending on factors such as revenue from product sales, variations in product lines, changes in our operating expenses, changes in our business strategy, and other general economic factors. Our revenues will also be difficult to forecast because the markets for our products are evolving and our revenues in any period could be significantly affected by new product announcements or product launches by our competitors. We are subject to intense competition and we may not be able to compete successfully in the market. We estimate that we have less than a 1% market share. We compete with companies large and small who wholesale over-the counter drugs, name brand drugs, and medical products. (See, "Business - Competition," on page 13.) We also compete with companies who manufacture and sell safety syringes. Many of these companies have brand name recognition and significantly greater financial, technical, marketing, and managerial resources. The primary factors which allow us to remain in the market is the price and quality of our products. We expect competition to persist, increase, and intensify in the future as the markets for our products develop and as additional competitors enter our market. Our success in establishing our Elite Safety Syringe, Elite name brand medical products and Tru-Choice Drugs as a recognized brand name and achieving their acceptance in the market will depend in part on our ability to continually deliver a quality product at a competitive price. We depend upon our patent and proprietary rights, none of which can be completely safeguarded against infringement. Our ability to compete effectively will depend, in part, upon our ability to protect our Elite Safety Syringe patent. (See "Patent, Trademark, License and Intellectual Property," on page 16.) Competition in our market is intense and our competitors may independently develop or obtain patents on syringes that are substantially equivalent or superior to ours. Intellectual property rights, by their nature, are uncertain and involve complex legal and factual questions. We may unknowingly infringe upon the proprietary rights of others, thereby exposing us to significant liability and/or damages. We are not aware of any third party intellectual property rights which would prevent us from marketing and developing our Elite Safety Syringe although such rights may exist. If we were to inadvertently infringe upon the intellectual property of another party, we could be forced to seek a license to those intellectual property rights, alter the products or processes so they no longer infringe upon those 4 rights, or engage in litigation. If we were required to attempt to obtain a license to another party's proprietary rights, our efforts would be expensive, and might be unsuccessful. We are dependent upon customers who may leave us at any time. We do not enter into long-term agreements with our customers and in the event one or more of our major customers were to use other wholesalers, we could experience a substantial drop in revenues. We may be subject to risks associated with global operations, including fluctuating currency exchange rates and political instability. We are in the process of establishing a manufacturing facility in Seoul, Korea and have entered into agreements with suppliers located in Korea. As a result, our future revenues may be affected by the economies of these countries. In addition, international operations are subject to a number of risks, including: longer payment cycles, unexpected changes in regulatory environments, import and export restrictions and tariffs, difficulties in staffing and managing international operations, greater difficulty or delay in accounts receivable collection, potentially adverse recessionary environments and economies outside the United States, and political and economic instability. RISKS RELATED TO THE OFFERING The future sale of common stock could pose investment risks, including substantial dilution to our stockholders. The market price of our common stock could drop as a result of sales of the common stock in the market after the effective date of this registration statement or the perception that such sales could occur. This event could also make it more difficult for us to raise funds through future offerings of our common stock. As of this filing we have authorized approximately 14,433,800 shares of outstanding common stock. If all warrants are exercised shortly after the effective date of this registration statement, it is possible that we will have 15,033,800 shares outstanding, with approximately 10,327,954 shares freely transferable without restriction or further registration under the Securities Act of 1933 (the "Securities Act"). Approximately 4,013,500 shares of our common stock are held by our "affiliates," as defined under Rule 144 of the Securities Act, and are "restricted securities," as defined under Rule 144. The Rule 144 common stock held by our affiliates may be sold in the future without further registration under the Securities Act to the extent those sales are permitted by Rule 144 or any other exemption under the federal securities laws. Investors may have difficulty selling our shares. There has not been a large public market for our common stock and it has traded on the Nasdaq SmallCap Market only since July 2001. We do not know the extent to which investor interest in our stock will lead to the development of an active trading market for our stock or how liquid that market might be. Investors may be unable to sell their Medi-Hut common stock at or above the price they paid for their Medi-Hut common stock. We have not paid dividends. We have not paid cash nor stock dividends on our common stock. We intend to retain future earnings to finance our growth and development and do not plan to pay cash or stock dividends in the foreseeable future. NOTE ABOUT FORWARD LOOKING STATEMENTS This prospectus contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this prospectus that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate" or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within Medi-Hut's control. These factors include but are not limited to economic conditions generally and in the industries in which Medi-Hut may participate; competition within Medi-Hut's chosen industry, including competition from much larger 5 competitors; technological advances and failure by Medi-Hut to successfully develop business relationships. USE OF PROCEEDS We are registering the shares for the benefit of the selling stockholders and they will sell the shares from time to time under this prospectus. We will not receive the proceeds from the resale of the 1,850,000 shares to be sold by the selling stockholders. The selling stockholders are not obligated to exercise their warrants, and there can be no assurance that they will exercise all or any of them. If they exercise all of the warrants we could receive approximately $4,050,000 in proceeds. We intend to use the proceeds from the warrants for working capital, which may include payment of salaries, rent, research and development, construction of a manufacturing facility, purchase of inventory and marketing expenses. We will pay all the costs of this offering, with the exception of the costs incurred by the selling stockholders for their legal counsel and the costs they may incur for brokerage commissions on the sale of their shares. MARKET FOR COMMON EQUITY In July 2001 our common stock began trading on the Nasdaq SmallCap Market under the symbol "MHUT." Prior to our Nasdaq listing, our common stock traded over-the-counter and was quoted on the NASD OTC Electronic Bulletin Board under the symbol "MHUT." The following table presents the range of the high and low bid prices of our stock as reported by the Nasdaq Trading and Market Services for each fiscal quarter for the last two fiscal years ending October 31st and for the nine month period ended July 31, 2001. These quotations represent prices between dealers and may not include retail markups, markdowns, or commissions and may not necessarily represent actual transactions. Fiscal Year Quarter Ended High Low ------------- ------------- ------- ------- 1999 January 31st $ 0.53 $ 0.13 April 30th 0.41 0.23 July 31st 0.94 0.20 October 31st 2.75 0.84 2000 January 31st $ 4.69 $ 1.53 April 30th 6.81 3.53 July 31st 5.63 3.00 October 31st 6.31 2.75 2001 January 31st $ 8.65 $ 4.66 April 30th 7.09 4.34 July 31st 8.98 5.64 There were approximately 264 stockholders of record as of October 26, 2001. As of the date of this filing, we believe 8,477,954 shares may be traded without restriction or further registration under the Securities Act. We have warrants outstanding to purchase 600,000 common shares at an exercise price of $6.75, expiring through October 2003. The remaining common shares held by our existing shareholders are "restricted securities," as that term is defined under Rule 144 of the Securities Act. Restricted securities may be sold in the public market only if they are registered or if they qualify for an exemption from registration under Rule 144 or otherwise. 6 DIVIDENDS We have not paid cash or stock dividends and have no present plan to pay any dividends, intending instead to reinvest our earnings, if any. For the foreseeable future, we expect to retain any earnings to finance the operation and expansion of our business. In addition, it is anticipated that the terms of future debt and/or equity financing may restrict the payment of cash dividends. Therefore, the payment of any cash dividends on the common stock is unlikely. However, payment of future dividends will be determined from time to time by our Board of Directors, based upon our future earnings, financial condition, capital requirements and other factors. We are not presently subject to any restriction on our present or future ability to pay any dividends. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS The following discussion and analysis should be read in conjunction with our financial statements and notes which are included at the end of this prospectus. (See, "Financial Statements," below.) We wholesale name brand drugs, medical products, over-the-counter drugs and anti-stick safety syringes. Acquisition Treatment: In April 2000, in an arm's length transaction, Medi-Hut acquired Vallar Consulting, a privately held New York corporation in the business of selling over-the-counter and name brand pharmaceuticals to distributors and wholesalers nationwide. Vallar had been one of our major customers during our 1999 fiscal year representing $120,211, or 9.4%, of our total revenues. Pursuant to the agreement, dated January 10, 2000, we issued 350,000 common shares valued at $1,340,500 to Lawrence Marasco, the sole owner of Vallar. The parties negotiated the acquisition price for Vallar rather than using typical valuation models. Vallar's value was established at approximately $1.3 million based upon posted revenues in excess of $3.5 million during its 1999 fiscal year, anticipated sales over a five year period, Mr. Marasco's 26 to 27 years of experience in the industry and the value of Vallar's client base. The assets involved in the transaction were primarily accounts receivable since Vallar did not own physical plants, equipment or property. The acquisition was treated as a pooling of interests for accounting purposes and Vallar became our wholly-owned subsidiary. The acquisition was structured as a tax free stock-for-stock exchange pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of 1986 as amended. Subsequently, Vallar was dissolved and all assets, liabilities and equity were recorded on our books and our financial statements have been restated to reflect these allocations. Joint Venture: On November 16, 2000, we entered into a joint venture with COA International Industries, Inc., a Korean corporation. The parties agreed to form Medi-Hut International as a Korean company to manage the production facility. On February 14, 2001 we received notice that Medi-Hut International (Mfg) Co., Ltd. ("Medi-Hut International") received Korean government approval and registration. Medi-Hut has a 44% ownership interest in the entity and management believes this interest will allow greater control of the manufacture and distribution of the Elite Safety Syringe. RESULTS OF OPERATIONS The following table summarizes our results of operations for the three and nine month periods ended July 31, 2001 and 2000 and the fiscal years ended October 31, 2000 and 1999. The results of operations for the three month period ended July 31, 2001, are not necessarily indicative of result to be expected for any subsequent period.
Three Months Ended July 31, Nine Months Ended July 31, Years Ended October 31, 2001 2000 2001 2000 2000 1999 ------------- ------------- ------------- ------------- ------------- ------------- (Restated) Net Sales $ 2,771,376 $ 1,975,516 $ 7,285,362 $ 5,470,566 $ 8,130,696 $ 4,758,268 Cost of Sales 2,363,940 1,650,215 6,237,851 4,807,432 7,396,343 4,267,363 ------------- ------------- ------------- ------------- ------------- ------------- Gross Profit 417,436 325,301 1,047,511 663,134 734,353 490,905 Selling, General & Administrative Expenses 222,750 111,028 535,378 389,603 498,835 581,346 ------------- ------------- ------------- ------------- ------------- ------------- Operating Income or (Loss) 194,687 214,273 512,134 273,531 235,518 (90,441) Other Income (Expense) 36,318 15,670 51,672 43,172 62,146 3,555 ------------- ------------- ------------- ------------- ------------- ------------- 8 Provision for Income Taxes 81,665 80,252 212,978 85,033 62,664 300 ------------- ------------- ------------- ------------- ------------- ------------- Net Income (loss) $ 149,340 $ 149,691 $ 350,827 $ 231,670 $ 235,000 $ (87,186) Earnings (Loss) per common share $ 0.02 $ (0.01)
NINE MONTHS ENDED JULY 31, 2001 COMPARED TO NINE MONTHS ENDED JULY 31, 2000 --------------------------------------------------------------------------- Net Sales. We realize revenue when products are shipped and title passes to our wholesalers. Sales are net of returns, which have historically been less than 2% of gross sales. Net sales were $2,771,376 for the third quarter of 2001 and $7,285,362 for the nine month period ended July 31, 2001. The nine month figure represents a $1,814,796 increase over the same period last year. The increase in sales was primarily the result of sales of name brand pharmaceuticals and our Elite Safety Syringe. Cost of Sales. Costs of sales primarily consists of the cost of the products purchased from third-party vendors and shipping costs. Total cost of sales as a percentage of net sales increased for the comparable quarter but decreased for the nine month period. Such costs were 84.9% of net sales for the third quarter of 2001 compared to 83.5% of net sales for the third quarter of 2000, but were 85.6% for the 2001 nine month period compared to 87.9% for the nine month period of 2000. The overall improved costs of sales are reflective of the greater profit margin of the Elite Safety Syringe. Despite the increase in costs of sales and aided by increased revenues, our gross profit increased by $92,135 in the third quarter of 2001 compared to the third quarter of 2000, and increased $384,377 in the 2001 nine month period compared to the 2000 nine month period. Selling General and Administrative. These expenses include employee salaries and benefits, employee travel expenses, advertising, office expenses and occupancy costs. These expenses increased $111,722 in the third quarter of 2001 compared to the third quarter of 2000 due primarily to the hiring of a Chief Financial Officer and general increases in salaries, product liability insurance premiums, consulting, NASDAQ fees and annual meeting/report expenses. In the nine month period of 2001 compared to the nine month period of 2000, general and administrative expenses increased $145,775. Such expenses were 7.3% of net sales in the 2001 nine month period compared to 7.1% of net sales for the comparable 2000 period. The increase in general and administrative expenses resulted in our income from operations decreasing $19,586 in the 2001 third quarter compared to the 2000 third quarter, and an increase of $238,603 in the 2001 nine month period compared to the same period in 2000. We recorded total other income, net of other expenses, of $36,318 for the 2001 third quarter compared to $15,670 for the third quarter of 2000. For the nine month period of 2001 we recorded total other income, net of other expenses, of $51,672 compared to $43,172 for the same period in 2000. The increases in 2001 compared to 2000 were due primarily to additional interest income from cash reserves and promissory notes receivable from exercised common stock purchase warrants. Our income taxes increased $1,413 in the third quarter of 2001 and $127,945 for the nine month period as a result of our increased net income. Our net income, after tax, decreased $351 in the 2001 third quarter and increased $119,157 in the 2001 nine month period compared to 2000 comparable periods. As a result, we posted a net income per share of $0.03 compared to an income per share of $0.02 for the 2000 nine month period. YEARS ENDED OCTOBER 31, 2000 AND 1999 Net Sales. Net sales increased $3,372,428 from fiscal year 1999 compared to the 2000 fiscal year. The increase in net sales for the 2000 fiscal year was primarily a result of increased sales of name brand drugs and medical products. 9 Cost of Sales. During fiscal year 2000 as sales increased the cost of sales has also increased from 89.7% of net sales in 1999 to 91.% of net sales in 2000. The increased costs are due to the smaller profit margin of the name brand drugs which accounted for 71.2% of our revenues. Selling, General and Administrative. In fiscal year 2000 these expenses decreased $82,511 from fiscal year 1999. The decrease in expenses resulted primarily from reduced travel and office expenses and reduced occupancy costs. Other Income (Expense). We recorded interest income of $62,146 for fiscal year 2000 compared to interest income of $8,109 for the 1999 fiscal year. This income is primarily from investments in commercial paper. The income was offset by a $4,554 interest expense incurred on our line of credit during fiscal year 1999. Income Taxes. We had $127,931 available net operating loss carry forwards as of October 31, 2000. We may use these carry forwards to reduce our Federal taxable income and tax liabilities in future years. The carry forwards will be used in full on our October 31, 2000 corporate tax return. Net Income (Loss). We posted a net income for the 2000 fiscal year compared to a net loss for the 1999 fiscal year. The acquisition of Vallar and sales of name brand drugs coupled with a reduction in selling, general and administrative expenses were the primary reasons for the net income. YEARS ENDED OCTOBER 31, 1999 AND 1998 Due to the acquisition and consolidation of Vallar, the financial statements for the fiscal year ended 1999 reflect the combined entities whereas the financial statements for the fiscal year 1998 are Medi-Hut's only. The following discussions reflect this consolidation. Accordingly, we believe a comparison of the results of our operations on a year-by-year basis is of limited benefit. Net Sales. Net sales increased from $779,537 in 1998 to $4,758,268 in 1999. This increase in net sales was a result of the acquisition of Vallar. However, net sales were low during fiscal year 1998 because we lost a major customer due to that company's change in ownership and the new management's decision to use a manufacturer who produced syringes in the United States. The loss of this customer represented approximately $375,000 in sales. Cost of Sales. During fiscal year 1999 costs of sales were $4,267,363 compared to $552,173 in 1998. Cost of sales were 70.8% of net sales in 1998 compared to 89.7% of net sales in 1999. The increased costs are due to the smaller profit margin of the name brand drugs. Selling, General and Administrative. In fiscal year 1999, selling, general and administrative expenses were $581,346 compared to $271,162 in 1998. The increase in expenses resulted primarily from increased accounting and legal expenses, increased officer and employee salaries and increased insurance expenses. Net Income (Loss). We posted a net loss of $45,997 in 1998 compared to a net loss of $87,186 in 1999. Despite an increase in sales, our gross profit was smaller due to the costs of sales. FACTORS AFFECTING FUTURE PERFORMANCE Management believes the following factors will affect our future results of operations: 1) Maintenance of our market share due to pricing our products below our competitors prices; 2) Continued concern of the public and government entities about sexually transmitted diseases; 3) Changes in federal and state regulations which will require use of safety syringes by health care workers; 4) Enactment of the Needlestick Safety and Prevention Act in November 2000 and legislation in 16 states 10 require the use of anti-stick syringes. QUARTERLY TRENDS We do not anticipate experiencing seasonal fluctuations in our operations because sales of medical supplies is not seasonal in nature. LIQUIDITY AND CAPITAL RESOURCES We have funded our cash requirements primarily through revenues and sales of our common stock. Management anticipates we will continue to meet our present requirements for working capital and capital expenditures for the next twelve months from revenues and equity transactions. For the period ended July 31, 2001, we had $2,746,024 in cash and working capital of $3,589,409 compared to cash of $502,243 and working capital of $1,192,888 at the year ended October 31, 2000. We had total current assets of $5,523,541 with total current liabilities of $1,934,136 as of July 31, 2001, compared to $2,908,632 total current assets and $1,716,444 total current liabilities for the fiscal year ended October 31, 2000. As of July 31, 2001, our principal commitments consisted of office and warehouse space and an automobile lease. Monthly rental payments are approximately $2,025 per month with total future minimum rental payments of $13,393 through the fiscal year 2003. Net cash used by our operating activities was $12,869 for the 2001 nine month period ended July 31, 2001, compared to $353,644 net cash provided by operating activities for the comparable 2000 nine month period. Net cash used by investing activities was $3,500,850 for the 2001 period compared to $148,435 net cash used by investing activities for the same period in 2000. Of the 2001 period amount, $1,000,000 is related to our investment of capital funding in Medi-Hut International (Mfg.) Co., Ltd. under our joint venture agreement with COA Industrial. In addition, we invested $1,850,000 to purchase marketable securities, which are unsecured, with terms ranging from 30 to 90 days and fixed interest rates ranging from 4.92% to 5.99% per annum. Net cash provided by financing activities was $5,757,500 for the 2001 period compared to $34,793 for the 2000 period. The 2001 period increase was primarily related to proceeds of $1,512,500 from the exercise of 800,000 warrants (which were granted under various agreements and the underlying common shares registered under the Securities Act of 1933 on January 29, 2001) and redeemed marketable securities of $1,850,000. In addition, $1,995,000 in proceeds were realized from the sale of common stock during the 2001 nine month period. On November 30, 2000, we agreed to sell, in a private placement, 475,000 units for $1,995,000 to Mid-West First Financial, Inc., an accredited investor. Each unit consisted of one common share and one warrant to purchase one common share. The warrants are exercisable for a period of five years at an exercise price of $5.25. The 475,000 warrants were exercised during the third quarter 2001 of which the company is holding a note receivable of $2,493,750 pertaining to the exercise. During the fourth quarter of the 2001 fiscal year we have conducted private placements which have resulted in an aggregate of $4,761,250 in proceeds. Specifically, beginning on September 7, 2001, we conducted a private placement to qualified purchasers of our common stock. The maximum offering was 1,000,000 common shares at $5.75 per share, with potential proceeds of $5,750,000. On October 19, 2001, we terminated the offering after we had sold an aggregate of 275,000 shares to seven purchasers for $1,581,250. Pursuant to the private placement memorandum, the purchasers of the shares sold in the private placement would have the right to include the shares purchased in the private placement in any registration statement filed by Medi-Hut within one year from September 7, 2001. Then in October 2001 we privately sold 600,000 units to Empire Fund for $3,180,000. Each unit consisted of one common share and a warrant to purchase an additional common share at $6.75. If the warrants granted as part of the units are exercised, we may realize an additional $4,050,000 in proceeds. Management believes this equity funding will satisfy our cash needs for at least that next twelve months. 11 FINANCING We have a $1,750,000 revolving line of credit which expires January 31, 2002. PNC Bank, N.A. makes loans to us at % above the prime interest rate for the revolving line of credit. This line of credit is secured by all the assets of Medi-Hut. As of the fiscal year ended 2000 and the third quarter ended July 31, 2001, there were no amounts outstanding on the line of credit. On October 4, 1999, we received preliminary approval from the New Jersey Economic Development Authority for $5.75 million in financial assistance to build or purchase a manufacturing facility in New Jersey for our Elite Safety Syringe. Management intends to establish a manufacturing facility in the United States in order to insure availability of product. We continue to seek an underwriter for the bonds, however, the New Jersey Authority may not be able to allocate tax-exempt private activity bonds if it receives financing requests which exceed its private activity bond caps or if it determines that other projects should have priority over Medi-Hut's project. We anticipate that for the present time we will rely on manufacturing facilities located in Korea to produce our Elite Safety Syringe. Management anticipates that if additional funds are needed for our future growth, we may seek additional funding through future securities offerings which will be effected pursuant to applicable exemptions under federal and state laws. We will determine the purchasers and manner of issuance according to our financial needs and the available exemptions. We also note that if we issue more shares of our common stock our shareholders may experience dilution in the value per share of their common stock. 12 BUSINESS The following description of Medi-Hut's business should be read in conjunction with the information included elsewhere in this prospectus. This section contains certain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results discussed in the forward-looking statements as a result of certain of the risk factors set forth below and elsewhere in this prospectus. We wholesale name brand drugs, medical products, our Elite Safety Syringe, our Elite brand private label medical products and our Tru-Choice over-the-counter drugs which are provided to us by various suppliers. We sell our products through drug wholesalers who then sell the products to pharmacies and through mail order. HISTORICAL DEVELOPMENT We were incorporated in the state of Utah as Gibraltor Energy on August 20, 1981. We later changed our name to Indwest, Inc. On January 28, 1998, Indwest entered into an Agreement and Plan of Reorganization with Medi-Hut Co., Inc., a New Jersey corporation incorporated on November 22, 1982 ("Medi-Hut - New Jersey"). Medi-Hut - New Jersey was involved in the business of selling wholesale medical supplies. Indwest was the surviving corporation of the merger and changed its name to Medi-Hut Co. Inc. ("Medi-Hut - Utah"). Pursuant to the merger agreement, the directors and officers of Indwest resigned and the management of Medi-Hut - New Jersey filled the vacancies, and the former shareholders of Medi-Hut - New Jersey obtained 55.4% of the voting power. On February 2, 1998, Medi-Hut Co., Inc. was incorporated in the state of Delaware. On February 27, 1998, Medi-Hut - Utah completed a change of domicile merger with the Delaware Medi-Hut. We currently are a Delaware corporation holding a Certificate of Authority to do business in the state of New Jersey. In April 2000, Medi-Hut acquired Vallar Consulting as a wholly-owned subsidiary through a stock-for-stock exchange. Vallar was in the business of selling over-the-counter and name brand pharmaceuticals to distributors and wholesalers nationwide. Pursuant to the agreement we issued 350,000 common shares, valued at $1,340,500, in exchange for the outstanding shares of Vallar. Subsequently, we distributed Vallar's assets to Medi-Hut and dissolved Vallar. PRINCIPAL PRODUCTS Name Brand Drugs. We wholesale name brand drugs which are drugs that are protected by patent or licensure: for example "Viagra." When a drug is patented, no other person can produce or sell that drug for twenty years without the patent owner's permission. In September of 1999 we began to wholesale Certia XT Caps, Nubain, Terazosin ACL Caps and Viagra. These name brand drugs were 85.0 % , or $6,200,761, and 71.2%, or $5,790,185, respectively, of our total revenues for the nine month period ended July 31, 2001 and the 2000 fiscal year. Medical Products. In April of 1999 we introduced our own "Elite" brand medical products. Our medical products are manufactured by third-party suppliers and include syringes, hot and cold packs, gauze bandages, adhesive bandages and paper products. These products accounted for approximately 22.2%, or $1,803,605, of our revenues during fiscal year 2000. Elite Safety Syringe. Our newest product is the Elite Safety Syringe which is our anti-stick safety syringe. Safety syringes are defined as those products that incorporate features designed to safely cover the sharp needle with minimal effort and minimize danger to the user by preventing accidental needle sticks. There are two types of anti-stick syringes: 1) Active device - this product demands that the user in some way make a physical movement to activate the device after the injection and prior to disposal; 2) Passive device - this product activates automatically after injection and should be designed not to interfere with the normal injection procedure. We hold a patent for the Elite Safety Syringe which is a passive device that incorporates a transparent sleeve into which the needle will 13 automatically retract after use. Unlike many anti-stick syringes that are now in the marketplace, our Elite Safety Syringe can be activated using a one hand technique. We believe our Elite Safety Syringe will decrease accidental needle sticks of medical service providers. In October of 2000 we started production of the Elite Safety Syringe in a FDA (Food and Drug Administration) registered and ISO 9002 approved facility in Korea (See, "Government Regulations," below.) The Elite Safety Syringe is manufactured in 1cc, 3cc and 5cc sizes. We also manufacture a 3cc Luer-Lock Tip safety syringe. We believe that our Elite Safety Syringe is manufactured using sophisticated, patented, high-tech machinery which allows production of a precise quality product. We market our Elite Safety Syringe through hospital distributors who handle the selling, in house training of users, warehousing and distribution of this product. Other Products. During our fiscal year 2000, our Elite brand and private label products, which include alcohol prep pads and condoms, have accounted for approximately 5.2% of our revenues and our Tru-Choice drugs, which we launched in September of 1999, were 1.4% of our revenues. For the nine months period ended July 31, 2001, these products have accounted for approximately 7.9% of our revenues. We believe our alcohol preps complement our syringe product line because they are primarily used as a topical antiseptic, anti-infective prior to administering injections. Each soft, absorbent, non-woven pad is impregnated with 70% isopropyl alcohol, USP. Our condoms are made of natural rubber latex and are silicone lubricated with a reservoir tip. Our latex condoms are made to exacting specifications, with each condom electrically tested for holes during the manufacturing process, dimensional checks are performed and leak tests using water are also conducted. We also have used lot numbers and expiration dates on our condom packages for the last eleven years. In July 2001 we added six new generic tablets and fourteen new liquid medications to out Tru-Choice product line for a total of 39 products. Product Liability Insurance. We currently maintain a product liability insurance policy with a limit of $3 million per loss per policy year. DISTRIBUTION Our products are sold through large drug wholesale chains in the United States who then sell them through pharmacies and mail order. We do not use a large sales force. We conduct our sales to wholesale distributors from our office located in Lakewood, New Jersey and our employees contact the wholesalers by telephone or make periodic visits. Once we have made a sale to a wholesaler, we place a purchase order with one of our third-party suppliers. Usually, the purchase order provides shipping instructions to the third-party supplier for delivery of the product to the wholesaler. In the event the product is not shipped by the third-party supplier, we have the product delivered to our warehouse and then ship it directly from our warehouse to the wholesaler. In August 2001 we hired Bond-Brown Sales Design, LLC, to market and sell our Elite Safety Syringe. Bond-Brown is a specialized consulting firm focused on sales and marketing effectiveness. Management believes that Bond-Brown will strengthen our market position and open new marketing and sales avenues. Our inventory consists of finished products which are warehoused at the third-party manufacturer's or supplier's facility or when necessary at our own warehouse. Our policy is to have at least 80% of a product in inventory prior to generating a purchase order for the product. We carry a one month inventory of products which are warehoused at the third-party manufacturer or assembly facilities we use. Our customary business practice is for our large buyers to place purchase orders several months in advance. This allows us to notify our third-party suppliers in advance of needed product. All sales are on thirty (30) day credit. Returned merchandise is minimal due to the vigorous tests that our products endure prior to shipment. 14 PRINCIPAL SUPPLIERS Our ordinary course of business is to place a purchase order with our third-party suppliers when we want to order product. We do not enter into long term formal contracts with our third-party suppliers in regards to the private brand labeling or manufacture of our products. However, we do require such third-party suppliers to agree not to disclose confidential information regarding the identity of our customers to third parties, to not directly or indirectly compete with us, nor to contact our customers. We also require the third-party supplier to agree to follow our delivery instructions in the purchase order. We purchase products internationally from FDA registered and ISO 9002 approved medical device facilities, as well as from manufacturers here in the United States. We are dependent upon these suppliers and the loss of any one of these suppliers would have a material adverse effect on our operations. However, we believe any of our suppliers could be replaced within sixty (60) days. Kinray Inc. located in New York supplies our name brand drugs. Sam Woo Corporation located in Seoul, Korea, supplies our 1cc Elite Safety Syringe and COA International Industries, Inc., also located in Korea supplies our 3cc and 5cc Elite Safety Syringe. Banta Health Care Products, Inc., located in Michigan, produces our miscellaneous paper products. We have teamed up with Packaging Electronics and Device Corporation for production of our hot and cold packs. Packaging Electronics and Device Corporation holds the patent to the hot and cold pack we sell and allows us to distribute and use our Elite brand label on their unique product. In November 2000 we entered into a joint venture with COA International Industries, Inc., a Korean corporation located in Seoul Korea. COA International manufactures and exports medical disposable products, including disposable syringes. The purpose of the joint venture was to establish a new syringe production facility located in the Republic of Korea. Pursuant to the agreement, we hold a 44% owner interest in Medi-Hut International, COA International holds a 46% ownership interest and the agent for the agreement, Inben Brothers Company, received a 10% ownership interest. Our initial capital contribution is $1,000,000. The agreement became effective in February of 2001 after Medi-Hut International received Korean approval. This facility is nearing completion and we expect this facility to begin production of our 3cc size Elite Safety Syringe within the next ninety (90) days. PRINCIPAL CUSTOMERS We do not enter into long term written agreements with our customers. We accept orders from our customers by telephone, fax, mailed purchase orders, or in person and immediately place the order with our suppliers. The loss of a major customer would have a material adverse effect on our results of operations. During fiscal year 2000 we relied on four major customers who are drug wholesale distributors for 69.4%, or $5,641,930, of our total revenues. These customers purchased name brand drugs and medical products. Jomar Marketing accounted for $2,287,981, or 28.1%, of our revenues. 824 Drug Corp. accounted for $1,235,661, or 15.2%; Colora accounted for $1,060,199, or 13.0%; and Larval Corp. accounted for $1,058,089 or 13%. During fiscal year 1999, we relied on three major customers for 41.3%, or $1,962,808, of our revenues. 824 Drug Corp accounted for $723,137, or 15.2%, of our revenues. Jomar Marketing and Larval Corp. accounted for 13.0% each of our revenues with $620,453 and $619,218, respectively. PRODUCT DEVELOPMENT We are committed to search out and develop safety products for the health care profession and to supply the consumer with quality medical products for a reasonable price. During the past three fiscal years we have incurred minimal research and development costs. We incurred approximately $32,201 in research and development costs during 1995 for FDA registration and patent protection of our Elite Safety Syringe. 15 COMPETITION We compete with companies large and small who wholesale name brand drugs and medical products. We believe we have less than a 1% share of such markets. We maintain our competitive stance by offering a quality product for less money. We believe our products are priced lower than products sold by the market leaders, which allows our third party wholesalers to realize greater profits. We price our products based upon available data regarding the selling prices of products being sold by the companies in our markets. Based on that data, management establishes a price for a product which is lower than the price of the market leaders. The safety syringe market is dominated by Becton Dickinson & Company and Sherwood/Davis & Geck, Division of American Home Products Company. Both of these companies manufacture an active device which requires two hands and activates manually after the injection. We compete with these companies by offering our Elite Safety Syringe which can be activated using a one hand technique and is priced lower than our competitor's products. Retractable Technologies, Inc. entered into the market place with a passive device similar to our Elite Safety Syringe. However, we intend to price our Elite Safety Syringe approximately 15% less than this competitor's passive syringe device. PATENT, TRADEMARK, LICENSE AND INTELLECTUAL PROPERTY Our Elite Safety Syringe holds United States Patent No. 5,562,626, issued October 8, 1996. In December of 1999 we filed an updated patent for the Elite Safety Syringe in which we improved our original design by reducing the number of parts and including a lock tip which allows changing of a needle to facilitate drawing medications from a medicine vial. Then in January 2001 we made another application for a new patent for our Elite Safety Syringe. We believe this patent is of material importance to the future growth of our business because of the anticipated growth in the safety syringe markets. The Elite Safety Syringe is classified as a passive anti-stick safety syringe and is one of the few that can be activated with the ease of use of a normal plastic disposable syringe. In June of 1995 we received FDA 510(k) #K933569 which allows us to assign the manufacturing rights of the Elite Safety Syringe. (See, "Government Regulation," below.) The 510(k) is listed as an initial distributor of a Class II Special Controls device. We do not have any licenses, franchise or concessions agreements in place for this product at this time. We believe our future success will depend, in part, on our ability to protect our Elite Safety Syringe patent; however, if a third party infringes upon our patent we could expend substantial costs in its protection. GOVERNMENT REGULATION FDA Our medical products are subject to regulation by the federal FDA and various other federal and state agencies as well as by a number of foreign governmental agencies. Our third-party manufacturers are primarily responsible for our products meeting these regulations. We believe they are in compliance in all material respects with the regulations based on the fact that our third-party manufacturers are FDA registered and their products meet FDA standards. Compliance with these regulations has not had, and is not expected to have, a material adverse effect on our business. Manufacturers in the United States, as well as our foreign manufacturers, who manufacture our products must be registered with the FDA. Our contract manufacturers must comply with an FDA registration process and are subject to random and unannounced on-site FDA periodic inspections. After registration with the FDA, the FDA will inspect the facility for compliance with the general controls. The general controls provisions require annual registration, listing of devices, good manufacturing practice, and labeling. It also prohibits misbranding and adulteration. Our foreign suppliers' finished products are analyzed and tested by the FDA either once the product enters the United States, or when it is taken off the shelf of a pharmacy or hospital. If the FDA has questions at the time of an inspection, the supplier will have a reasonable time to answer and comply with the necessary governmental concerns. 16 Our third party manufacturers are responsible for education of their employees regarding FDA requirements and we ensure they receive all changes of rules applicable either to product compliance or good manufacturing procedures as announced in the Federal Register. We notify our suppliers of changes that we deem necessary or we are aware of that are being discussed within the governmental agencies. By keeping our third party manufacturers informed we help them remain on the cutting edge of governmental changes in laws. 510(k) Approval We filed a Section 510(k) notification of intent to market our Elite Safety Syringe and on March 14, 1995, the FDA granted approval to manufacture and market the Elite Safety Syringe in the United States. This 510(k) approval is not FDA approval of the Elite Safety Syringe, but approval to market the syringe. The purpose of a 510(k) approval is to demonstrate that the medical device is substantially equivalent to a legally marketed device that was or is currently in the United States market. A device is substantially equivalent if, in comparison to a legally marketed device it: (a) has the same intended use as a legally marketed device and has the same technological characteristics as such device; or (b) has the same intended use as such device; and has different technological characteristics that have to be proved safe. In the case of our Elite Safety Syringe, we were required to perform a clinical evaluation study to prove that the Elite Safety Syringe, as intended for use, was similar to devices on the market that had no spring activation. The Elite Safety Syringe had a 90% acceptance rating in its clinical evaluations. We then met with the FDA after the clinical evaluation and the FDA inquired about the number of syringes used in the evaluation and where in the hospitals the evaluations were located. After this meeting, the FDA granted the 510(k) without further inquiry. ISO 9002 We purchase product from international suppliers who we require to be ISO 9002 approved. ISO 9002, the International Quality System Standard, is a quality assurance program with a principle focus on management responsibility, planning, monitoring, corrective action, and documentation. These principles are applied to the production and the installation aspects of a business. ISO 9002 applies in situations when: a) The specified requirements for product are stated in terms of an established design or specification, and b) Confidence in product conformance can be attained by adequate demonstration of a supplier's capabilities in production, installation and servicing. An ISO 9002 facility uses procedures that include management, quality plans, contracts, document/data, purchasing, traceability, process control, correct/prevent, storage/handle, quality records, auditing, training, servicing, and statistics. Korean Registration On February 14, 2001, we received notice that Medi-Hut International (Mfg) Co. Ltd. had received Korean government approval and registration. Notice of this registration appeared in the daily newspaper in Daejun as required by Korean law. Included in the Korean registration for Medi-Hut International is not only certification for safety syringe production but also certification for manufacturing of standard disposable syringes, authority for retail sales in the Korean market, authorization for import and export of the syringes and authority to manufacture assembly machines. EMPLOYEES We have seven full-time employees, three of which are directors and officers. Our employees are not presently covered by any collective bargaining agreement. We believe that our relations with our employees are good, and we have not experienced any work stoppages. AVAILABLE INFORMATION We are required to comply with the reporting requirements of the Securities Exchange Act of 1934, as amended ("Exchange Act"). We must file annual, quarterly and other reports with the Securities and Exchange Commission ("SEC"). We also are be subject to the proxy solicitation requirements of the Exchange Act and, accordingly, furnish an annual report with audited financial statements to our stockholders. 17 Copies of this registration statement may be inspected, without charge, at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0300. We are an electronic filer and our copies of reports, proxy and information statements and other information should be available through the Internet by using the SEC's EDGAR Archive, the address of which is http://www.sec.gov. We use an investor relations firm, Columbia Financial Group, ("Columbia Financial") and interested persons may call at (888) 301-6271. Columbia Financial has provided consulting and services for investor relations, public relations, publishing, advertising, fulfillment, as well as Internet related services to Medi-Hut for the past three years. Columbia Financial provides such services for a term, usually of twelve (12) months, for a set fee. In October 2000 we entered into another consultant agreement with Columbia Financial and Columbia Financial agreed to accept $1.2 million fee plus warrants to purchase 600,000 common shares for its services under the new agreement. However, the agreement was amended in February 2001 to provide that Columbia Financial would waive the $1.2 million and Medi-Hut agreed to reduce the exercise price of the warrants from $5.00 per share to $2.50 per share and to change the expiration date from October 1, 2005 to October 1, 2001. As of the date of this prospectus, Columbia Financial has exercised all of the warrants. We have recorded $20,833 for consulting expenses related to this contract as of October 31, 2000. We do not reimburse Columbia Financial for expenses incurred for its services. Either party may terminate the agreement with thirty (30) days written notice with certain conditional repayments. Columbia Financial has also entered into an agreement on our behalf with Internet Stock Market Resources for dissemination of our company information to its subscribers. PROPERTY We lease 3500 square feet of office and warehouse space located in Lakewood, New Jersey. The leased premises are part of a 35,000 square foot industrial park. The initial term of the lease was for five years with the right to renew the lease for a period of five (5) years after the initial term. In February, 2001 we renewed the lease for an additional year and it will expire in February of 2002. We pay approximately $2,000 per month, but the monthly rent payment is contingent upon increases in taxes, insurance and common area maintenance expense. We may cancel the lease with a 90 days written notice to the landlord. We are currently completing construction of the Medi-Hut International (Mfg.) Ltd. facility located in Seoul, Korea. This facility is approximately 70,000 square feet and will house the automated assembling machines for our 3cc Elite Safety Syringe. We hold a 44% ownership interest in this facility, pursuant to our joint venture agreement with COA International. LEGAL PROCEEDINGS To the best of our knowledge we are not a party to any proceedings or threatened proceedings as of the date of this prospectus. 18 MANAGEMENT Our directors, executive officers and key employees and their respective ages and positions with us are set forth below. Biographical information for each of those persons is also presented below. As provided in our by-laws, our Board has approved an increase from three (3) directors to five (5) directors during the 2001 fiscal year. Each elected director serves until the next annual meeting or until he is succeeded by another qualified director who has been elected. Our executive officers are chosen by our Board of Directors and serve at its discretion. Joseph Sanpietro and Vincent Sanpietro are brothers. Nominee's Name Age Position Held -------------------- ----- ----------------- Joseph A. Sanpietro 50 President, Chief Executive Officer, Director Vincent J. Sanpietro 53 Secretary, Director Robert Russo 41 Treasurer, Director James G. Aaron 56 Director James S. Vaccaro 44 Director Laurence M. Simon 36 Chief Financial Officer Joseph A. Sanpietro Joseph has been the President, Chief Financial Officer and Director of Medi-Hut since January 1998. He served as the President of Medi-Hut-New Jersey from 1982 to 1998. Mr. Sanpietro has had challenging careers with Cooper Laboratories, as a front line analytical chemist; Schering-Plough as an international analytical chemist leader where he was the youngest assistant manager with both BS and MS chemists reporting directly to him. Mr. Sanpietro was a project manager at Johnson & Johnson heading a multi-million dollar relocation startup project. He graduated from Hofstra University in 1972, with a Bachelor of Science degree in chemistry and he continued his education at Seton Hall University with studies in chemistry and law. Vincent J. Sanpietro Vincent has been the Secretary and Director of Medi-Hut since January 1998. He served as Secretary for Medi-Hut-New Jersey, from 1982 to 1998. He held managerial positions in Wells Recruiting Personnel and he was President of Focus Personnel, an Illinois Corporation. Vincent was also Vice President of Sales of Focus Medical Products, Inc. He graduated with a bachelors degree in Business Administration from New York Institute of Technology. Robert Russo Mr. Russo has been the Treasurer and a Director of Medi-Hut since March 1998. He is the Managing Senior Partner of Koenig, Russo and Associates, LLC and has been employed with that firm since 1982. He has extensive experience in accounting, auditing, and business management. Mr. Russo has concentrated his work in the field of taxes, employee benefit programs, business, financial, estate and retirement planning. Mr. Russo graduated from Seton Hall University, New Jersey, with a degree in accounting and received his Masters in Business Administration in business finance. Mr. Russo is also a member of the New Jersey Society of Certified Public Accountants and the American Institute of Certified Public Accountants. James G. Aaron Mr. Aaron was elected as a Director on April 3, 2001. He is a shareholder in the law firm of Anzell Zaro Grimm & Aaron, P.C., located in Ocean, New Jersey. Mr. Aaron chairs the firm's commercial litigation, municipal law and bankruptcy department. He started with Ansell Zaro in May of 1996. Mr. Aaron formerly served on the advisory board of the Jersey Shore Bank and has represented Colonial First National Bank, MidAtlantic/Merchants National Bank, Atlantic National Bank, Fidelity Union Bank, and Monmouth County National Bank. He graduated from New York University School of Law in 1969, receiving a J.D. degree. He is presently a member of the Executive Committee and serves as Secretary and member of the Board of Directors of Monmouth Community Bank, a New Jersey state-chartered banking institution. James S. Vaccaro Mr. Vaccaro was elected as a Director on April 3, 2001. He is Chief Executive Officer of Monmouth Community Bank located in Long Branch, New Jersey and has held that position since April 2000. He has served as Chairman of the Board of Monmouth Community Bank since its inception in July of 1998. From January 1997 to April 2000 he served as a Director of ASA, Inc. an international risk management employee 19 benefits and healthcare provider. From March 1995 to December 1996 he was employed by First Option Health Plan, an HMO located in Red Bank, New Jersey, serving as its Executive Vice President and Chief Operating Officer and assisting that company in its search for a corporate partner. He has over 15 years experience in the banking industry along with five years experience in the managed care industry. He received an PMD Degree from Harvard Graduate School in May 1990 and a bachelors degree in economics from Ursinus College in May 1979. He currently serves as a director of Labvolt, Inc., a reporting company. Laurence M. Simon On April 20, 2001, our Board of Directors appointed Mr. Simon as our Chief Financial Officer. Mr. Simon is a certified public accountant who has over 14 years of experience in the accounting field assisting clients with corporate finance, Securities and Exchange Commission reports, and preparation of individual, corporate and fiduciary tax returns. From 1989 to April 2001, he had been employed by the accounting firm of Rosenberg, Rich, Baker, Berman and Company, Certified Public Accountants, located in Bridgewater, New Jersey. He is a member of the American Institute of Certified Public Accountants and the New Jersey Society of Certified Public Accountants. He received a bachelor's degree in accounting from Belmont Abbey College located in Belmont, North Carolina. EXECUTIVE COMPENSATION The following table shows the compensation paid to our named executive officers in all capacities during the past three fiscal years. SUMMARY COMPENSATION TABLE Annual Compensation Fiscal Name and Principal Position Year Salary ($) Bonus Other ----------------------------- ------ ------------- -------- ----------- Joseph A. Sanpietro 2000 $ 77,225 $ 0 $ 6,000 (1) President, CEO and Director 1999 85,200 0 0 1998 83,940 0 0 Vincent J. Sanpietro, Secretary 2000 51,428 0 5,000 (1) and Director 1999 63,700 0 0 1998 47,353 0 0 Robert Russo 2000 0 0 23,302 (2) Treasurer and Director 1999 0 0 5,635 (2) 1998 0 0 6,260 (2) (1) Personal benefits: Lease payments for automobile. (2) Paid to Koenig, Russo & Associates for accounting services performed for Medi-Hut by Mr. Russo. COMPENSATION OF DIRECTORS We do not have any standard arrangement for compensation of our directors for any services provided as director, including services for committee participation or for special assignments. EMPLOYMENT CONTRACTS As of the date of this filing, we have not entered into employment contracts with our executive officers. The entire Board of Directors participates in deliberations concerning executive officer compensation. Using their 20 business judgment, the Board determines the yearly salary for each officer. We believe the salaries paid to our executive officers are reasonable based on their experience and responsibilities. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS For the fiscal year 2000 and 1999, we paid approximately $23,302 and $5,635, respectively, to Koenig, Russo & Associates LLC for the accounting services provided to us by Robert Russo, our Treasurer and Director. Mr. Russo is the managing member of Keonig, Russo & Associates LLC. On April 20, 2001, we hired Laurence M. Simon as our Chief Financial Officer, with an annual salary of approximately $100,000. Mr. Simon had been employed since 1989 by the accounting firm of Rosenberg, Rich, Baker, Berman and Company, Certified Public Accountants. Rosenberg, Rich, Baker, Berman has been for the past two fiscal years, and continues as, Medi-Hut's independent auditor. Mr. James G. Aaron, our director, is a shareholder of the law firm of Ansell Zaro Grimm & Aaron, P.C., which serves as Medi-Hut's general counsel. Medi-Hut has paid approximately $3,342 in legal fees to Ansell Zaro Grimm & Aaron, P.C., during fiscal year 2000. On October 19, 2001 we sold an aggregate of 135,000 common shares from our private placement to certain directors and officers. Robert Russo, our Treasurer and Director, purchased 100,000 shares for $575,000; Laurence M. Simon, our Chief Financial Officer, purchased 10,000 shares for $57,500; and, ERBA Co, Inc., a corporation affiliated with James G. Aaron, our Director, purchased 25,000 shares for $143,750. PRINCIPAL STOCKHOLDERS The following table sets forth the beneficial ownership of our outstanding common stock of: (i) each person or group known by us to own beneficially more than 5% of our outstanding common stock, (ii) each of our executive officers, (iii) each of our director's and (iv) all executive officers and directors as a group. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated by footnote, the persons named in the table below have sole voting power and investment power with respect to the shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership is based on 14,058,800 shares of authorized outstanding common stock as of October 26, 2001, plus an additional 600,000 shares which may be acquired upon exercise of warrants within the next 60 days. MANAGEMENT Common Stock Beneficially Owned ------------------------------- Name and Address of Number of Shares of Beneficial Owners Common Stock Percentage of Class ---------------------------------- --------------------- ------------------- Joseph A. Sanpietro 3,279,200 22.4 % 1935 Swarthmore Avenue Lakewood, New Jersey 08701 Vincent J. Sanpietro 554,800 3.9 % 1935 Swarthmore Avenue Lakewood, New Jersey 08701 21 Robert Russo 125,000 (1) * 1935 Swarthmore Avenue Lakewood, New Jersey 08701 James G. Aaron 42,500 (2) * 1500 Lawrence Avenue Ocean, New Jersey 07712 James S. Vaccaro 2,000 * 627 Second Avenue Ocean, New Jersey 07712 Laurence M. Simon 10,000 * 1935 Swarthmore Avenue Lakewood, New Jersey 08701 All executive officers and directors as a group 4,013,500 28.5 % * Less than one percent (1) Mr. Russo shares voting and investment power of 25,000 shares held by his wife. (2) Mr. Aaron shares voting and investment power of 36,000 shares held by ERBA Co., Inc. and 6,500 shares held by his family trust. 22 DESCRIPTION OF SECURITIES We have 100,000,000 authorized common shares, par value $.001, of which 14,058,800 common shares are outstanding as of October 26, 2001. In addition, we have granted warrants to purchase 600,000 common shares at an exercise price of $6.75, which are exercisable through October 5, 2003. (See, "Selling Stockholders," below.) All shares of common stock have equal rights and privileges with respect to voting, liquidation and dividend rights. Each holder of common stock is entitled to one vote for each share owned of record on all matters voted upon by stockholders, and a majority vote of the outstanding shares present at a stockholders' meeting is required for actions to be taken by stockholders. Directors are elected by a majority vote. The holders of the common stock do not have cumulative voting rights. Accordingly, the holders of a majority of the voting power of the shares voting for the election of directors can elect all of the directors if they choose to do so. The common stock bears no preemptive rights, and is not subject to redemption, sinking fund or conversion provisions. Holders of common stock are entitled to receive dividends out of funds legally available if, and when, declared by our Board of Directors and to participate pro rata in any distribution of assets available for distribution upon liquidation of Medi-Hut. Any dividends declared with respect to shares of common stock will be paid pro rata in accordance with the number of shares of common stock held by each stockholder. SELLING STOCKHOLDERS The following table identifies the selling stockholders and indicates their relationship to us within the past three years and the number of shares of common stock owned by each prior to the offering, estimates the number of shares to be offered for the selling stockholder's account and estimates the number of shares and percentage of outstanding shares to be owned by each selling stockholder after the completion of the offering. Since the selling stockholders may sell all, a portion or none of their shares from time to time, or may exercise the warrants at any time, no firm estimate can be made of the aggregate number of shares that are being offered or that will be owned by each selling stockholder upon completion of the offering to which this prospectus relates. Accordingly, the ownership amount and percentage before and after the offering assumes exercise of all 600,000 warrants, which would result in 14,658,800 shares outstanding.
---------------------------------------------------------------------------------------------- Securities owned prior Number of Securities owned after to offering shares being offering Name and relationship Shares Percent Registered Shares Percent ---------------------------- ------------- ------------ ------------- ------------ ----------- Empire Fund Managers, LLC Investor 1,200,000 (1) 8.2% 1,200,000 (1) 0 - ---------------------------- ------------- ------------ ------------- ------------ ----------- Joseph A. Sanpietro President, CEO and director 3,279,200 22.4% 250,000 3,029,200 20.6% ---------------------------- ------------- ------------ ------------- ------------ ----------- Robert Russo Treasurer and Director 125,000 * 100,000 25,000 * ---------------------------- ------------- ------------ ------------- ------------ ----------- Laurence M. Simon Chief Financial Officer 10,000 * 10,000 0 - ---------------------------- ------------- ------------ ------------- ------------ ----------- Lawrence P. Marasco Vice President of Sales 285,000 1.9% 125,000 160,000 1.0% ---------------------------- ------------- ------------ ------------- ------------ ----------- John Clayton Consultant and Investor 100,000 * 100,000 0 - ---------------------------- ------------- ------------ ------------- ------------ ----------- 23 ERBA Co., Inc. Affiliate of James G. Aaron, Director 42,500 * 25,000 17,500 - ---------------------------- ------------- ------------ ------------- ------------ ----------- Robert Colarossi Investor 10,000 * 10,000 0 - ---------------------------- ------------- ------------ ------------- ------------ ----------- Laura Efron Investor 10,000 * 10,000 0 - ---------------------------- ------------- ------------ ------------- ------------ ----------- Bruce Blackman Investor 20,000 * 20,000 0 - ---------------------------- ------------- ------------ ------------- ------------ ----------- * Less than 1% (1) Includes ownership of shares issuable upon exercise of warrants.
TRANSACTIONS RELATED TO THE OFFERING We agreed to register 1,850,000 common shares under this prospectus based on certain transactions between Medi-Hut and the selling stockholders, which are described below. Beginning on September 7, 2001, we conducted a private placement of our common stock to qualified purchasers pursuant to Rule 505 of Regulation D of the Securities Act. The maximum offering was 1,000,000 common shares at $5.75 per share with potential proceeds of $5,750,000. The offering price was based on the trading price of our common stock on the Nasdaq SmallCap Market and the OTC Bulletin Board for approximately a ninety (90) day period prior to the offering date. On October 19, 2001, we terminated the offering after we had sold an aggregate of 275,000 shares to seven purchasers for $1,581,250. Pursuant to the private placement memorandum, the purchasers of the shares sold in the private placement would have the right to include their shares purchased in the private placement in any registration statement filed by Medi-Hut within one year after September 7, 2001. On October 5, 2001, we entered into a Unit Purchase Agreement with Empire Fund Managers, LLC, a Nevada limited liability company ("Empire Fund") for the sale and purchase of 600,000 units for a unit price of $5.32. Each unit consisted of one common share and a warrant to purchase one additional share. The warrant is exercisable for a period of two years at an exercise price of $6.75 per share. Empire Fund has agreed to limit its ownership of our shares to not more than 4.99% at any one time. Due to the volatility in the price of our common stock and the variations in the trading volume, we surveyed the quoted trading price of our common stock on the Nasdaq SmallCap Market and the OTC Bulletin Board for approximately 90 days prior to the transaction and used that information to establish the price of the units and warrants. In connection with the Unit Purchase Agreement, we entered into a registration rights agreement with Empire Fund which provided that we would file a registration statement prior to November 20, 2001, and use our best efforts to cause the registration statement to be effective by January 5, 2002. If we fail to file a registration statement prior to December 5, 2001, or the registration statement is not declared effective by January 18, 2002, we may be liable for liquidated damages of five-percent (5%) of the purchase price of the shares for every fifteen (15) calendar day period until the registration statement has been filed or has been declared effective. We will bear the costs of the registration and are required to keep the registration statement current until the earliest of the following: . until all shares have been registered; . until the selling stockholders sell the shares under the provisions of Rule 144; or . until the selling stockholders may sell the shares under the provisions of Rule 144(k) without volume limitation. 24 PLAN OF DISTRIBUTION We will not use the services of underwriters or dealers in connection with the sale of the shares registered under this prospectus. The shares will be freely transferable, except in the event the shares are sold to affiliates. We have agreed to register these shares; but the registration of these shares does not necessarily mean that any of them will be offered or sold by the selling stockholders. The selling stockholders will have absolute discretion as to the manner and timing of sales of the shares, when and whether the warrants are exercised and the sale of the shares issued upon exercise of the warrants. They may sell all or a portion of the shares through public or private transactions, on or off established markets, or in negotiated transactions or otherwise. The sales may be at prevailing prices or related to the current market price or at negotiated prices. The shares may be sold directly or through brokers or dealers, or in a distribution by one or more underwriters on a firm commitment or best-efforts basis. The methods by which the shares may be sold include: . a block trade, which may involve crosses, in which the broker or dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; . purchases by a broker or dealer as principal and resale by the broker or dealer for its own account; . ordinary brokerage transactions and transactions in which the broker solicits purchasers; . privately negotiated transactions; . The selling stockholders may deliver all or a portion of the shares to cover a short sale or sales made after the date of this prospectus, or a call equivalent position or a put equivalent position entered or established after the date of this prospectus; and/or . The selling stockholders may also sell all or any portion of the shares in reliance upon Rule 144 under the Securities Act. The distribution of the shares is not subject to any underwriting agreement. The selling stockholders and any broker-dealers participating in the distribution of the shares may be deemed to be "underwriters" within the meaning of the Securities Act, and any profit on the sale of the shares by the selling stockholders and any commissions received by any broker-dealers may be deemed to be underwriting commissions or discounts under the Securities Act. We and the selling stockholders will be subject to applicable provisions of the Securities Exchange Act of 1934 and the rules and regulations promulgated under it, including, without limitation, Regulation M, which may limit the timing of purchases and sales of the shares by the selling stockholders and any other person. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of the shares to engage in market-making activities with respect to the particular shares being distributed for a period of up to five (5) business days prior to the commencement of the distribution. All of the foregoing may affect the marketability of our shares and the ability of any person or entity to engage in market-making activities with respect to the shares. In the event a particular offer of these shares is made we will distribute a prospectus supplement, if required, that will identify the name of any dealers or agents and any commissions and other terms constituting compensation from the selling stockholders and any other required information. These shares may be sold at varying prices determined at the time of sale or at negotiated prices. In order to comply with the securities laws of certain states, if applicable, these shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, these shares may not be sold unless they have been registered or qualified for sale in that state or an exemption from the registration or qualification requirement of that state is available and is complied with. INTEREST OF NAMED EXPERTS AND COUNSEL We are not aware of any expert or legal counsel named in this prospectus who will receive a direct or indirect substantial interest in the offering. Our counsel, Cindy Shy, P.C., has provided an opinion regarding the validity of the shares to be issued upon exercise of the warrants. Our financial statements for the fiscal years ended October 31, 2000 and 1999, have been audited by Rosenberg, Rich, Baker & Berman, Certified Public Accountants. We have included our financial statements in this prospectus in reliance on Rosenberg, Rich, Baker & Berman's report, given on their authority as experts in accounting and auditing. 25 COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITY Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the registration rights agreement we have agreed to indemnify each selling stockholder, its officers, directors and each person controlling them within the meaning of the Securities Act. We have agreed to reimburse each selling stockholder, for all costs and attorney's fees incurred in connection with investigation or defense of any action which arises out of or is based upon: . any untrue statement or alleged untrue statement of a material fact contained in any prospectus or any related registration statement incident to this registration; or . any omission or alleged omission to state a material fact required to be stated or necessary to make the statements not misleading; . however, we will not indemnify a selling stockholder if the untrue statement or omission, or alleged untrue statement or omission, was provided to Medi-Hut in writing by the selling stockholder for use in the preparation of any registration statement or prospectus. Each selling stockholder has agreed to indemnify and reimburse Medi-Hut, it officers and directors and persons who control Medi-Hut for any claims or actions based on a material misstatement or omission, or alleged untrue statement or omission, as described above. However, the selling stockholder is not required to indemnify Medi-Hut if the action or claim is related to our failure to supply a copy of the prospectus to a person to whom we are obligated to provide a copy. AVAILABLE INFORMATION We are subject to certain informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and, accordingly, file reports, proxy statements and other information with the Securities and Exchange Commission. These reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at Room 1024 of the SEC's office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549. Additional updating information with respect to the securities covered by this prospectus may be provided in the future to purchasers by means of amendments to this prospectus. This prospectus does not contain information in or attached as an exhibit to the registration statement. Purchasers should refer to those exhibits to the registration statement for the complete text. For further information concerning Medi-Hut and the securities offered, refer to the registration statement and its exhibits which may be inspected at the office of the SEC without charge. A copy of the registration statement, any post-effective amendment and exhibits may be accessed through the SEC's web site at http://www.sec.gov. We currently use an investor relations firm, Columbia Financial Group, Inc. and interested persons may call at (888) 301-6271. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS We have not had a change in or disagreement with our principal independent accountant during the past two fiscal years. 26 FINANCIAL STATEMENTS Financial statements of Medi-Hut for the nine month period ended July 31, 2001 (unaudited) Condensed Interim Balance Sheet.................................... F-1 Condensed Interim Statements of Operations......................... F-2 Condensed Interim Statements of Cash Flows......................... F-3 Notes.............................................................. F-4 Financial Statements of Medi-Hut for the years ended October 31, 2000 and 1999 Independent Auditors' Report....................................... F-9 Balance Sheets..................................................... F-10 Statements of Operations........................................... F-11 Statements of Stockholder's Equity................................. F-12 Statements of Cash Flows........................................... F-13 Notes.............................................................. F-15 27 Medi-Hut Co., Inc. Condensed Interim Balance Sheet July 31, 2001 ASSETS CURRENT ASSETS Cash and Interest Bearing Deposits $ 2,746,024 Accounts Receivable 2,199,000 Other Current Assets 578,517 -------------- TOTAL CURRENT ASSETS 5,523,541 PROPERTY AND EQUIPMENT, NET OF 515,741 ACCUMULATED DEPRECIATION OTHER ASSETS Joint Venture Investment at Equity 1,000,000 Other Assets 436,036 -------------- TOTAL OTHER ASSETS 1,436,036 -------------- TOTAL ASSETS 7,475,318 ============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable 1,721,792 Other Current Liabilities 212,344 -------------- TOTAL CURRENT LIABILITIES 1,934,136 STOCKHOLDERS' EQUITY Common Stock 13,184 Additional paid in capital 12,578,649 Notes Receivable on Exercised Warrants (3,993,750) Consultant Services to be Provided (2,106,000) Deferred Charges (57,506) Retained (Deficit)/Earnings (893,395) -------------- TOTAL STOCKHOLDERS' EQUITY 5,541,182 -------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,475,318 ============== See Notes to the Condensed Interim Financial Statements **Unaudited** F-1 28 Medi-Hut Co., Inc. Condensed Interim Statements of Operations Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended July 31, 2001 July 31, 2000 July 31, 2001 July 31, 2000 -------------- ------------- ------------- ------------- NET SALES $ 2,771,376 $ 1,975,516 $ 7,285,362 $ 5,470,566 COST OF SALES 2,353,940 1,650,215 6,237,851 4,807,432 -------------- ------------- ------------- ------------- GROSS PROFIT 417,436 325,301 1,047,511 663,134 GENERAL & ADMINISTRATIVE 222,750 111,028 535,378 389,603 -------------- ------------- ------------- ------------- INCOME FROM OPERATIONS 194,687 214,273 512,134 273,531 OTHER INCOME 36,318 15,670 51,672 43,172 -------------- ------------- ------------- ------------- INCOME BEFORE PROVISION FOR INCOME TAXES 231,005 229,943 563,805 316,703 PROVISION FOR INCOME TAXES 81,665 80,252 212,978 85,033 -------------- ------------- ------------- ------------- NET INCOME $ 149,340 $ 149,691 $ 350,827 $ 231,670 ============== ============= ============= ============= EARNINGS PER COMMON SHARE $ 0.01 $ 0.01 $ 0.03 $ 0.02 ============== ============= ============= ============= EARNINGS PER COMMON SHARE ASSUMING DILUTION $ 0.01 $ 0.01 $ 0.03 $ 0.02 ============== ============= ============= ============= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 12,874,017 10,829,800 11,954,153 10,626,954 ============== ============= ============= ============= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ASSUMING DILUTION 12,874,017 11,205,726 11,954,153 10,878,493 ============== ============= ============= ============= See Notes to the Condensed Interim Financial Statements **Unaudited** F-2 29 Medi-Hut Co., Inc. Condensed Interim Statements of Cash Flows Nine Months Nine Months Ended July 31, Ended July 31, 2001 2000 -------------- ------------- Net Cash Provided (Used) by Operating Activities (12,869) 353,644 Cash Flows from Investing Activities - Investment in Joint Venture (1,000,000) - Purchase of marketable securities (1,850,000) - Purchase of other assets (400,000) (146,627) Purchase of equipment (250,850) (1,808) -------------- ------------- Net Cash (Used) by Investing Activities (3,500,850) (148,435) Cash Flows from Financing Activities - Exercise of stock warrants 1,512,500 - Redemption of marketable securities 2,250,000 - Issuance of common stock 1,995,000 34,793 -------------- ------------- Net Cash Provided by Financing Activities 5,757,500 34,793 Net Increase in Cash and Interest Bearing Deposits 2,243,781 240,002 Cash and Interest Bearing Deposits - Beginning of Period 502,243 392,518 -------------- ------------- Cash and Interest Bearing Deposits - End of Period $ 2,746,024 $ 632,520 ============== ============= Schedule of Non-Cash Financing and Investing Activities Notes Receivable of $3,993,750 were issued pertaining to the exercise of common stock purchase warrants outstanding See Notes to the Condensed Interim Financial Statements **Unaudited** F-3 30 Medi-Hut Co., Inc. Notes to the Condensed Interim Financial Statements July 31, 2001 NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to item 310 of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended July 31, 2001 and July 31, 2000 are not necessarily indicative of the results that may be expected for the years ended October 31, 2001 and October 31, 2000 respectively. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Organization Medi-Hut Co., Inc. (the Company), is a company in the business of selling wholesale medical supplies. The Company was incorporated on November 22, 1982 in the State of New Jersey. On January 28, 1998, the Company entered into an Agreement and Plan of Reorganization (APR) with a public company Indwest, Inc. (Indwest), a Utah company incorporated on August 20, 1981 (formerly known as Gibraltor Energy, Gibraltor Group, Computermall of Philadelphia, Inc. and Steering Control Systems, Inc.) Pursuant to the APR, Medi-Hut's shareholders exchanged 100% of their common shares for 4,295,000 newly issued shares of Indwest on March 3, 1998. For accounting purposes, the acquisition has been treated as an acquisition of Indwest by Medi-Hut and a recapitalization of Medi-Hut. The historical financial statements prior to January 28, 1998 are those of Medi-Hut. Pro-forma information is not presented since the combination is considered a recapitalization. Subsequent to the exchange, Medi-Hut merged with Indwest whereby Medi-Hut ceased to exist and Indwest, the surviving corporation, changed its name to Medi-Hut Company, Inc. On February 2, 1998 Medi-Hut Company, Inc. changed its state of domicile from Utah to Delaware. The surviving corporation's operations are entirely those of the former and new Medi-Hut. Accounts Receivable No reserve for doubtful accounts has been established since management believes that all accounts receivable are collectible in full. **UNAUDITED** F-4 31 Medi-Hut Co., Inc. Notes to the Condensed Interim Financial Statements July 31, 2001 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Deferred Charges Deferred charges are comprised of costs incurred by the Company for seeking small business loan financing. These charges will be amortized over the loan period when and if such financing is obtained or expensed in full should such financing not be obtained. No amortization expense has been recognized during the three months ended July 31, 2001 and July 31, 2000. Depreciation Machinery and equipment are stated at cost. Depreciation is computed using the straight-line method for financial reporting purposes, which amounted to $31,257 and $144 for the three months ended July 31, 2001 and July 31, 2000 respectively. The estimated useful lives of the machinery and equipment assets for financial statement purposes are five years. The estimated useful lives of molds for financial statement purposes are three years. For income tax purposes, recovery of capital costs for machinery and equipment and molds are made using accelerated methods over the asset's class life. Repairs and maintenance expenditures, which do not extend the useful lives of the related assets are expensed as incurred. Revenue Recognition Revenue from product sales is recognized at the time of shipment provided that the resulting receivable is deemed probable of collection. Income Taxes In accordance with the provisions of Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes" (SFAS No. 109"), deferred taxes are recognized for depreciation differences between book and tax methods and for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to realize. Earnings Per Common Share Earnings per common share, in accordance with the provisions of Financial Accounting Standards Board No. 128, "Earnings per Share", is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period and the effect on the weighted average number of shares of dilutive common stock equivalents (warrants) if exercised. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. **UNAUDITED** F-5 32 Medi-Hut Co., Inc. Notes to the Condensed Interim Financial Statements July 31, 2001 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Securities Issued for Services The Company accounts for common stock and common stock purchase warrants issued for services by reference to the fair market value of the Company's stock on the date of stock issuance or warrant grant in accordance with Financial Accounting Standards Board Statement No. 123 "Accounting for Stock-Based Compensation. (FASB 123)" Compensation/consultant expense is recorded for the fair market value of the stock and warrants issued. NOTE 3 - CONCENTRATIONS OF CREDIT AND BUSINESS RISK The Company maintains cash balances in a financial institution. Accounts at the institution are insured by the Federal Deposit Insurance Corporation up to $ 100,000 per account, of which the Company's accounts may, at times, exceed the federally insured limits. The Company provides credit in the normal course of business to customers located primarily in the northeastern portion of the U.S. The Company performs ongoing credit evaluations of its customers. NOTE 4 - LINE OF CREDIT On January 31, 2001 the Company received a bank commitment on a $750,000 revolving line of credit under which the bank has agreed to make loans at % above the prime interest rate. The Company's business assets secure the note. As of July 31, 2001 and July 31, 2000 there were $ 0 outstanding on the line of credit. NOTE 5 - STOCKHOLDERS' EQUITY TRANSACTIONS On October 1, 2000 the Company executed an agreement for public relations services to be provided. The original terms of the agreement required cash payments of $100,000 per month, totaling $1,200,000 and 600,000 warrants entitling the holder to an exercise price of $5.00 per share. The requirements of the agreement were amended to provide no cash payments and the 600,000 warrants to be adjusted to an exercise price of $2.50 per share and an extension of the service trial period to August 1, 2001. The warrants have full vesting rights upon issuance and an expiration date of October 1, 2001. The warrants were exercised in full in May 2001 and a note receivable was issued for $1,500,000. On December 18, 2000, 100,000 warrants were exercised by a warrant holder totaling $300,000 of proceeds to the Company and the issuance of 100,000 shares of common stock. On January 5, 2001 the Company issued 4,000 shares of common stock valued at $18,000 to an insurance company in exchange for a Directors and Officer's liability policy. **UNAUDITED** F-6 33 Medi-Hut Co., Inc. Notes to the Condensed Interim Financial Statements NOTE 5 - STOCKHOLDERS' EQUITY TRANSACTIONS, Continued On January 31, 2001, 700,000 warrants were exercised by two different warrant holders totaling $1,212,500 of proceeds to the Company and the issuance of 700,000 shares of common stock. On February 1, 2001, the Company sold 475,000 units to an investor in accordance with the provisions of Section No. 4(2) and Regulation D of the Securities Act of 1933. Each unit had a price of $4.20 and was comprised of one share of the Company's common stock and one warrant to purchase a share of common stock in the Company, exercisable for a period of five years. The aforementioned warrants grant the investor or holder the right to purchase one additional share at a price of $5.25 per share. The warrants were exercised in full in June 2001 and a note receivable was issued for $2,493,750. NOTE 6 - INVESTMENTS On November 16, 2000 the Company entered into a joint venture agreement with a South Korean company whereby Medi-Hut shall contribute $1,000,000 for a 44% interest in the entity. The Korean Government approved the registration of the new entity on February 15, 2001. The entity will provide a facility for the production of the Company's patented safety syringe and allow for better control over the manufacturing and distribution process. **UNAUDITED** F-7 34 Medi-Hut Company, Inc. Financial Statements October 31, 2000 and 1999 (Restated) F-8 35 Rosenberg Rich Baker Berman -------------- & Company -------------- A Professional Association of Certified Public Accountants 380 Foothill Road * PO Box 6483 * Bridgewater NJ 08807-0483 Phone: 908-231-1000 * Fax: 908-231-6894 * E-mail: rrbb@net-lynx.com Independent Auditors' Report To the Board of Directors and Stockholders of Medi-Hut Company, Inc. We have audited the balance sheets of Medi-Hut Company, Inc. as of October 31, 2000 and 1999 and the related statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Medi-Hut Company, Inc. as of October 31, 2000 and 1999, and the results of its operations, and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Rosenberg Rich Baker Berman & Company Bridgewater, New Jersey December 20, 2000 F-9 36 Medi-Hut Company, Inc. Balance Sheets October 31, --------------------------- 2000 1999 ------------- ------------- (Restated) Assets Current Assets Cash $ 502,243 $ 384,733 Marketable securities 400,000 900,000 Accounts receivable 863,597 496,805 Inventory 238,808 28,975 Prepaid expenses 3,984 2,188 Deferred consulting fees 900,000 - ------------- ------------- Total Current Assets 2,908,632 1,812,701 ------------- ------------- Machinery and Equipment 29,124 27,316 Molds 154,800 - Less: Accumulated Depreciation (40,789) (27,316) ------------- ------------- Net Machinery and Equipment and Molds 143,135 - Deposit on equipment 183,267 - Deferred consulting fees, net of current portion 300,000 - Capitalized Cost Reduction, net of accumulated amortization of $4,796 and $4,164, respectively - 632 Patent and Licensing Costs, net of accumulated amortization of $8,018 and $6,334, respectively 37,264 25,867 ------------- ------------- Total Assets 3,572,298 1,839,200 ============= ============= Liabilities and Stockholders' Equity Current Liabilities Accounts payable and accrued expenses 753,780 477,594 Deferred consulting payable 900,000 - Income taxes payable 45,540 - Deferred income taxes payable 17,124 - ------------- ------------- Total Current Liabilities 1,716,444 477,594 Deferred consulting payable, net of current portion 300,000 - ------------- ------------- Total Liabilities 2,016,444 477,594 ------------- ------------- Stockholders' Equity Common stock, voting $.001 par value; 100,000,000 shares authorized; 10,829,800 and 10,822,800 shares issued and outstanding, respectively 10,830 10,823 Additional paid-in capital 4,887,753 2,827,967 Consultant services to be provided (2,041,000) (13,708) Deferred charges (57,506) (20,713) Retained earnings (deficit) (1,244,223) (1,442,763) ------------- ------------- Total Stockholders' Equity 1,555,854 1,361,606 ------------- ------------- Total Liabilities and Stockholders' Equity $ 3,572,298 $ 1,839,200 ============= ============= See notes to the financial statements. F-10 37 Medi-Hut Company, Inc. Statements of Operations Year Ended October 31, --------------------------- 2000 1999 ------------- ------------- (Restated) Net Sales $ 8,130,696 $ 4,758,268 ------------- ------------- Cost of Goods Sold Beginning inventory 28,500 38,739 Net Purchases 7,593,591 4,251,205 Custom fees/freight 13,060 6,394 ------------- ------------- Cost of Goods Available for Sale 7,635,151 4,296,338 Less: Ending Inventory 238,808 28,975 ------------- ------------- Cost of Goods Sold 7,396,343 4,267,363 ------------- ------------- Gross Profit 734,353 490,905 Selling, General and Administrative Expenses 498,835 581,346 ------------- ------------- Income (Loss) from Operations 235,518 (90,441) ------------- ------------- Other Income (Expense) Interest income 62,146 8,109 Interest expense - (4,554) ------------- ------------- Total Other Income (Expense) 62,146 3,555 ------------- ------------- Income (Loss) Before Provision for Income Taxes 297,664 (86,886) Provision for Income Taxes 62,664 300 ------------- ------------- Net Income (Loss) $ 235,000 $ (87,186) ============= ============= Earnings (Loss) per Common Share $ 0.02 $ (0.01) ============= ============= Earnings (Loss) per Common Share-assuming dilution $ 0.02 $ (0.01) ============= ============= See notes to the financial statements. F-11 38 Medi-Hut Company, Inc. Statement of Stockholders' Equity Period from October 31, 1998 to October 31, 2000
Common Stock (No Par Value Prior to Consultant Common Recapitalization) Additional Services Retained Shares ($.001 Par Paid-In To Be Deferred Earnings Issued Value) Capital Provided Charges (Deficit) Total ------------- ---------------- ----------- ------------- --------- ------------ ----------- Balances, October 31, 1998 8,272,800 $ 8,273 $ 934,767 $ - $ - $ (564,345) $ 378,695 Issuance of Common Shares Pursuant to a Private Placement Memorandum Shares Issued at discounted market value 2,200,000 2,200 1,854,050 - - - 1,856,250 Dividend related to the difference between the issue price and discounted market value - - - - - (866,250) (866,250) Issuance of Warrants for Services Provided - - 23,500 (23,500) - - - Funds expended for Deferred Charges - - - - (20,713) - (20,713) Amortization of Consultant Services - - - 9,792 - - 9,792 Net (Loss) Year Ended October 31, 1999 (Restated) - - - - - (87,186) (87,186) ------------- ---------------- ----------- ------------- --------- ------------ ----------- Balances, October 31, 1999 10,472,800 10,473 2,812,317 (13,708) (20,713) (1,517,781) 1,270,588 Issuance of Common Shares Pursuant to the acquisition of Vallar Consulting Group 350,000 350 15,650 - - 75,018 91,018 ------------- ---------------- ----------- ------------- --------- ------------ ----------- Balances, October 31, 1999 (as Restated) 10,822,800 10,823 2,827,967 (13,708) (20,713) (1,442,763) 1,361,606 Dissolution of Vallar Consulting Group - - (16,000) - - (36,460) (52,460) Funds expended for Deferred Charges - - - - (2,000) - (2,000) Stock issued to non-employee for deferred charges 7,000 7 34,786 - (34,793) - - Issuance of Warrants and Payment Agreement for Services to be Provided - - 2,041,000 (2,041,000) - - - Amortization of Consultant Services - - - 13,708 - - 13,708 Net Income Year Ended October 31, 2000 - - - - - 235,000 235,000 ------------- ---------------- ----------- ------------- --------- ------------ ----------- Balances, October 31, 2000 10,829,800 $ 10,830 $4,887,753 $ (2,041,000) $(57,506) $(1,244,223) $1,555,854 ============= ================ =========== ============= ========= ============ =========== See notes to the financial statements. F-12
39
Medi-Hut Company, Inc. Statements of Cash Flows Year Ended October 31, ----------------------------- 2000 1999 -------------- -------------- (Restated) Cash Flows From Operating Activities Net Income (Loss) $ 235,000 $ (87,186) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation and amortization 15,789 2,821 Amortization of prepaid consulting expense 13,708 26,625 Deferred income taxes 17,124 - Dissolution of Vallar Consulting Group (62,675) - Decrease (Increase) in Assets Accounts receivable (366,792) (231,428) Inventory (209,833) 9,764 Prepaid expenses (1,796) 2,320 Increase (Decrease) in Liabilities Accounts payable and accrued expenses 276,186 447,949 Income taxes payable 45,540 - -------------- -------------- Net Cash Provided(Used) by Operating Activities (37,749) 170,865 -------------- -------------- Cash Flows From Investing Activities Cash acquired from acquisition of Vallar 10,215 - Purchases of marketable securities - (900,000) Redemption of marketable securities 500,000 - Cash paid for molds and equipment (156,608) - Cash paid for patent and licensing costs (13,081) - Cash paid for deposit on equipment (183,267) - -------------- -------------- Net Cash Provided (Used) by Investing Activities 157,259 (900,000) -------------- -------------- Cash Flows From Financing Activities Proceeds from sale of common stock - 998,500 Repayment of lines of credit - (39,195) Cash paid for deferred charges (2,000) (20,713) -------------- -------------- Net Cash Provided (Used)by Financing Activities (2,000) 938,592 -------------- -------------- Net Increase in Cash 117,510 209,457 Cash at Beginning of Period 384,733 175,276 -------------- -------------- Cash at End of Period $ 502,243 $ 384,733 ============== ============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash Paid During the Period for: Interest $ - $ 4,554 ============== ============== Income taxes $ 300 $ 300 ============== ============== See notes to the financial statements. F-13
40 Medi-Hut Company, Inc. Statements of Cash Flows, Continued SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES Common stock purchase warrants ($2,041,000) and a payment schedule ($1,200,000) were issued by the Company during 2000 for consultant services to be provided totaling $3,241,000. Common stock purchase warrants were issued by the Company during 1999 for consultant services to be provided amounting to $23,500. Common stock dividends amounting to $866,250 during 1999 were recognized as to the difference between the average high/low market price and issue price of the 2,200,000 common shares issued in accordance with the private placement memorandum. Common stock was issued in 2000 for deferred charges amounting to $34,793. The Company acquired Vallar Consulting Group in a business combination accounted for under the pooling of interests method during 2000: Assets $ 74,690 Liabilities (6,611) Equity (78,294) Cash Received $ 10,215 See notes to the financial statements F-14 41 Medi-Hut Company, Inc. Notes to the Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Organization Medi-Hut Company, Inc. ("Medi-Hut" or "the Company"), a company in the business of selling wholesale medical supplies, was originally incorporated in the State of New Jersey on November 22, 1982. On January 28, 1998, the Company entered into an Agreement and Plan of Reorganization (APR) with a public company Indwest, Inc. (Indwest), a Utah company incorporated on August 20, 1981 (formerly known as Gibraltor Energy, Gibraltor Group, Computermall of Philadelphia, Inc. and Steering Control Systems, Inc.). Pursuant to the APR, Medi-Hut's shareholders exchanged 100% of their common shares for 4,295,000 newly issued shares of Indwest on March 3, 1998. For accounting purposes, the acquisition has been treated as an acquisition of Indwest by Medi-Hut and a recapitalization of Medi-Hut. The historical financial statements prior to January 28, 1998 are those of Medi-Hut. Pro-forma information is not presented since the combination is considered a recapitalization. Subsequent to the exchange, Medi-Hut merged with Indwest whereby Medi-Hut ceased to exist and Indwest, the surviving corporation, changed its name to Medi-Hut Company, Inc. On February 2, 1998, Medi-Hut Company, Inc. changed its state of domicile from Utah to Delaware. The surviving corporation's operations are entirely those of the former and new Medi-Hut. Acquisition of Vallar Consulting Group and Restatement On April 4, 2000, the Company acquired Vallar Consulting Group (Vallar) in a business combination accounted for as a pooling of interests. Vallar Consulting Group, which engages in the sales of medical supplies, became a wholly owned subsidiary of the Company through the exchange of 350,000 restricted shares of the Company's common stock for all of the outstanding stock of Vallar Consulting Group. Vallar was subsequently dissolved and all the assets, liabilities and equity was recorded on the books of Medi-Hut. The accompanying financial statements for October 31, 2000 and 1999 are based on the assumption that the companies were combined for the years ended October 31, 2000 and 1999 and financial statements of prior years have been restated to give effect to the combination. The following is a reconciliation of the amounts of net sales and net income (loss) previously reported for the year ended October 31, 1999 with restated amounts: Net Sales As previously reported $ 1,272,419 Vallar Consulting Group 3,485,849 ---------------- As Restated $ 4,758,268 ================ Net Income (Loss) As previously reported $ (74,462) Vallar Consulting Group (12,724) ---------------- As Restated $ (87,186) ================ F-15 42 Medi-Hut Company, Inc. Notes to the Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Investments in Marketable Securities The Company invests in debt securities which are classified at the date of purchase as held-to-maturity securities. Held-to-maturity securities are reported at amortized cost, as the Company has both the ability and intent to hold such securities until maturity. Accounts Receivable No reserve for doubtful accounts has been established since management believes that all accounts receivable are collectible in full. Inventory Inventory is stated at the lower of cost (determined on a first-in, first-out basis) or market. Market values represent the lower of replacement cost or estimated net realizable value. Deferred Charges Deferred charges are comprised of costs incurred by the Company for seeking small business loan financing. These charges will be amortized over the loan period when and if such financing is obtained or expensed in full should such financing not be obtained. No amortization expense has been recognized during the years ended October 31, 2000 and 1999. Depreciation Machinery and equipment are stated at cost. Depreciation is computed using the straight line method for financial reporting purposes which amounted to $13,473 and $263 for the years ended October 31, 2000 and 1999 respectively. The estimated useful lives of the machinery and equipment assets for financial statement purposes are five years. The estimated useful lives of molds for financial statement purposes are three years. For income tax purposes, recovery of capital costs for machinery and equipment and molds are made using accelerated methods over the asset's class life. Repairs and maintenance expenditures which do not extend the useful lives of the related assets are expensed as incurred. Amortization The capitalized cost reduction on the auto lease is being amortized over the life of the lease (24 months). Total amortization for the years ended October 31, 2000 and 1999 was $632 and $948, respectively. Research and Development The only research and development costs incurred relate to patent and licensing costs which are being amortized over their remaining useful lives of 20 years on a straight line basis beginning on the patent application dates. Total amortization for the years ended October 31, 2000 and 1999 was $1,685 and $1,610, respectively. Revenue Recognition Revenue from product sales is recognized at the time of shipment provided that the resulting receivable is deemed probable of collection. Income Taxes In accordance with the provisions of Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes" (SFAS No. 109"), deferred taxes are recognized for depreciation differences between book and tax methods and for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to realized. F-16 43 Medi-Hut Company, Inc. Notes to the Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Securities Issued for Services The Company accounts for common stock and common stock purchase warrants issued for services by reference to the fair market value of the Company's stock on the date of stock issuance or warrant grant in accordance with Financial Accounting Standards Board Statement No. 123 "Accounting for Stock-Based Compensation. (FASB 123)" Compensation/consultant expense is recorded for the fair market value of the stock and warrants issued. NOTE 2 - CONCENTRATIONS OF CREDIT AND BUSINESS RISK The Company maintains cash balances in a financial institution. Accounts at the institution are insured by the Federal Deposit Insurance Corporation up to $100,000 per account, of which the Company's accounts may, at times, exceed the federally insured limits. The Company provides credit in the normal course of business to customers located primarily in the northeastern portion of the U.S. The Company performs ongoing credit evaluations of its customers. NOTE 3 - MARKETABLE SECURITIES Cost and fair value of the Company's investments in Held-to-maturity debt securities are as follows: October 31, 2000 1999 -------------- -------------- Amortized Cost $ 400,000 $ 900,000 Gross Unrealized Gains/Losses - - -------------- -------------- Fair Value $ 400,000 $ 900,000 ============== ============== The debt securities held at October 31, 2000 are due November 30, 2000, have a fixed interest rate of 6.49% per annum and are unsecured. The debt securities held at October 31, 1999 were due between November 24, 1999 to November 26, 1999, had a fixed interest rate of 5.26% and 5.29% per annum and are unsecured. The amortized costs and fair values of debt securities Held-to-maturity at October 31, 2000 and 1999 by expected maturity are all due in one year or less. NOTE 4 - INVENTORY Inventory consists of purchased finished goods which totaled $238,808 and $28,975 at October 31, 2000 and October 31, 1999 (Restated), respectively. F-17 44 Medi-Hut Company, Inc. Notes to the Financial Statements NOTE 5 - LINES OF CREDIT On October 10, 1997, the Company obtained a $150,000 revolving line of credit under which the bank has agreed to make loans at 3% above the prime interest rate. The line expired on October 10, 2000 but was renewed until October 10, 2001 and may be used to support and finance the Company's commercial foreign letters of credit. As of October 31, 2000 and October 31, 1999, there were $0 outstanding on this line of credit. At October 31, 2000 and 1999, the Company had a $0 open letters of credit. Also on October 10, 1997, the Company obtained a $50,000 working capital line of credit under which the bank has agreed to make loans at 2% above the prime interest rate. The line expired on August 30, 2000, but was renewed until August 30, 2001. As of October 31, 2000 and October 31, 1999, there were no amounts outstanding on this line of credit, respectively. Both lines of credit are secured by all of the Company's assets and personal guarantees of the Company's officers. NOTE 6 - OPERATING LEASE COMMITMENTS The Company leases certain office and warehouse space (90 days cancelable) and an automobile under operating leases. The following is a schedule of future minimum rental payments (exclusive of common area charges) required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of October 31, 2000. Year Ending October 31, 2001 $ 6,697 2002 6,697 2003 2,789 --------- Total minimum payments required $ 16,183 ========= Rent expense for the years ended October 31, 2000 and 1999 (Restated) amounted to $27,347 and $27,713, respectively. The office and warehouse lease contain provisions for contingent rental payments based upon increases in taxes, insurance and common area maintenance expense. NOTE 7 - EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) per common share in accordance with the provisions of Financial Accounting Standards Board No. 128, "Earnings per Share", is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (warrants) have not been included in this computation as of October 31, 1999 since the effect would be anti-dilutive. At October 31, 2000, the following amounts were used in computing earnings per share and the effect on the weighted average number of shares of dilutive potential common stock. The number of shares used in the calculations for October 31, 2000 reflect of the common stock equivalents (warrants) if exercised: F-18 45 Medi-Hut Company, Inc. Notes to the Financial Statements NOTE 7 - EARNINGS (LOSS) PER COMMON SHARE, Continued Year Ended October 31, --------------------------- 2000 1999 ------------- ------------- (Restated) Weighted average number of common shares used in basic EPS 10,679,013 9,159,238 Effect of Dilutive Securities: Warrants 1,400,000 - ------------- ------------- Weighted average number of common shares and dilutive potential common stock used in EPS - assuming dilution 12,079,013 9,159,238 ============= ============= NOTE 8 - WARRANTS/DEFERRED CONSULTING FEES/CONSULTANT SERVICES TO BE PROVIDED Pursuant to a one year consulting agreement beginning on March 2, 1998 for public relations services, the Company issued common stock purchase warrants as follows: Exercise Price Exercise Term No. of Per --------------------------- Date of Grant Shares Share Start Expiration Vesting Rights -------------- -------- -------- ------------- ------------- -------------- March 2, 1998 50,000 $ 3.00 March 2, 1998 March 2, 2001 Upon Issue March 2, 1998 50,000 3.50 March 2, 1998 March 2, 2001 Upon Issue March 2, 1998 50,000 4.00 March 2, 1998 March 2, 2001 Upon Issue March 2, 1998 50,000 5.00 March 2, 1998 March 2, 2001 Upon Issue Pursuant to another one year consulting agreement on June 1, 1999 for public relations services, the Company additionally issued the following warrants: Exercise Price Exercise Term No. of Per --------------------------- Date of Grant Shares Share Start Expiration Vesting Rights -------------- -------- -------- ------------- ------------- -------------- June 1, 1999 125,000 $ 0.50 June 1, 1999 June 1, 2002 Upon Issue June 1, 1999 125,000 0.75 June 1, 1999 June 1, 2002 Upon Issue June 1, 1999 125,000 1.00 June 1, 1999 June 1, 2002 Upon Issue June 1, 1999 125,000 1.25 June 1, 1999 June 1, 2002 Upon Issue On October 1, 2000, the Company executed an additional 16 month agreement for public relations services to be provided that requires cash payments of $100,000 per month, totaling $1,200,000 beginning February 1, 2001. Moreover, 600,000 warrants have also been included as part of the agreement which entitles the holder to an exercise price of $5.00 per share, full vesting rights upon issuance and an expiration date of October 1, 2005. The Company has a four month trial period in which the entire agreement may be rendered null and void by the Company up to February 1, 2001 at which time, should the agreement continue in effect, straight-line amortization of the Deferred Consulting Fees and Consultant Services to be Provided will begin and extend over a twelve month period. On October 18, 2000, the Company issued to a consultant 100,000 warrants for future services to be provided over a three year period. The exercise price is $3.00 per share, full vesting rights upon issuance and an expiration date of October 18, 2003. F-19 46 Medi-Hut Company, Inc. Notes to the Financial Statements NOTE 8 -WARRANTS/DEFERRED CONSULTING FEES/CONSULTANT SERVICES TO BE PROVIDED. Continued Consultant expense of $20,883 and $26,625 for the years ended October 31, 2000 and 1999, respectively, has been recorded in accordance with FASB Statement No. 123 as a part of selling, general and administrative expenses. The fair value of each warrant issued is estimated on the grant date using the black scholes pricing model with the following weighted-average assumptions used for grants for the years ended October 31, 2000 and 1999; dividend yield of 0%, risk-free interest of 5%, and expected lives of 3-5 years for the warrants. Warrants issued for consultant services to be provided have been valued at $2,041,000 and $23,500 at October 31, 2000 and 1999, respectively, and are reflected as contra equity accounts on the balance sheets. At October 31, 2000 and 1999, there were 1,400,000 and 700,000 shares eligible for exercise, respectively, at prices ranging from $.50 to $5.00 per share. The weighted average remaining contractual life of the warrants is one year,3 months and 2 years, respectively, for the years ended October 31, 2000 and 1999. The weighted average exercise price of the warrants is $3.22 and $1.73, respectively, for the years ended October 31, 2000 and 1999. NOTE 9 - MAJOR CUSTOMERS For the years ended October 31, 2000 and 1999 (Restated), the Company had six major customers, sales to which represented approximately 78% ($6,323,926) and 61% ($2,909,814), respectively, of the Company's revenues. The Company had accounts receivable balances due from these customers of $633,686 and $345,753 at October 31, 2000 and October 31, 1999 (Restated), respectively. The loss of these customers would have a materially adverse effect on the Company. The following indicates the revenues from each of the major customers: Year Ended October 31, ---------------------------- 2000 1999 -------------- ------------- (Restated) Major Customer #1 $ 402,109 $ 341,492 Major Customer #2 279,887 307,608 Major Customer #3 2,287,981 297,906 Major Customer #4 1,060,199 620,453 Major Customer #5 1,058,089 619,218 Major Customer #6 1,235,661 723,137 -------------- ------------- Total $ 6,323,926 $ 2,909,814 ============== ============= NOTE 10 - RELATED PARTY TRANSACTIONS Accounting services of $23,302 and $5,635 for years ended October 31, 2000 and 1999, respectively, were provided by a firm of which certain individuals in that firm are shareholders/directors of the Company. NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS Cash, Accounts Receivable, Accounts Payable and Lines of Credit The carrying amount approximates fair value because of the short maturity of these instruments. Limitations Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimate. F-20 47 Medi-Hut Company, Inc. Notes to the Financial Statements NOTE 12 - INCOME TAXES The income tax provision (benefit) is comprised of the following: Federal State Total ------------ ----------- ------------ Year Ended October 31, 2000 Current $ 37,001 $ 8,539 $ 45,540 Deferred 13,913 3,211 17,124 ------------ ----------- ------------ $ 50,914 $ 11,750 $ 62,664 ============ =========== ============ Year Ended October 31, 1999 Current $ - $ 300 $ 300 Deferred - - - ------------ ----------- ------------ $ - $ 300 $ 300 ============ =========== ============ Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate entirely to net operating loss carryforwards for both Federal and State income tax purposes in 1999 and depreciation differences in 2000. The differences between income tax provision (benefit) in the financial statements and the tax expense (benefit) computed at the U.S. Federal Statutory rate are as follows: October 31, ---------------------------- 2000 1999 ------------- -------------- Federal statutory rate 39% - State tax rate 9% - Depreciation (27%) - Benefit from net operating loss carryforwards - (15)% Valuation allowance - 15 % ------------- --------------- Effective tax rate 21% - ============= =============== The Company's total deferred tax (attributable to depreciation differences in 2000 and net operating loss carry forwards in 1999) and valuation allowance at October 31, 2000 is as follows: October 31, --------------------------- 2000 1999 ------------- ------------- Deferred tax asset $ - $ 15,000 Deferred tax liability (17,124) - Less valuation allowance - (15,000) ------------- ------------- Net deferred tax asset (liability) $ (17,124) $ - ============= ============= The change in the valuation allowance amounted to $15,000 and $12,000 for the years ended October 31, 2000 and 1999, respectively. F-21 48 Medi-Hut Company, Inc. Notes to the Financial Statements NOTE 13 - SUBSEQUENT EVENTS On November 16, 2000, the Company entered into a joint venture agreement with a South Korean company whereby Medi-Hut shall contribute $1,000,000 for a 44% interest in the anticipated entity. The joint venture formation is subject to approval by the South Korean government. The new entity will provide a facility for production of the Company's patented safety syringe and allow for better control over the manufacturing and distribution process. On November 30,2000, the Company entered into an agreement to issue and sell 475,000 units to an investor in accordance with the provisions of Section 4(2) and Regulation D of the Securities Act of 1933. Each unit will have a price of $4.20 and shall be comprised of one share of the Company's common stock and one warrant to purchase a share of common stock in the Company which shall be exercisable beginning on the closing date of the transaction and extend over a five year period thereafter and shall grant to the investor or holder the right to purchase one additional share of the Company's common stock at a price of $5.25 per share. If this transaction had occurred prior to the October 31, 2000 balance sheet date, the weighted average of common shares outstanding for purposes of calculating earnings per share-assuming dilution would have increased by 950,000 common shares to 13,029,013 resulting in no change to the presently calculated $.02 earnings per share-assuming dilution. On December 18, 2000, 100,000 warrants were exercised by a warrant holder totaling $300,000 of proceeds to the Company and the issuance of 100,000 shares of common stock. F-22 49 * * * No dealer, salesman or any other person ---------- has been authorized to give any information or to make any representations not contained PROSPECTUS in this prospectus; any information or representation not contained herein must not ---------- be relied upon as having been authorized by Medi-Hut. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities other than the securities covered by this prospectus; nor does it constitute an offer to sell, or a solicitation of an offer to buy, any of the securities covered by this prospectus by Medi-Hut or any person to whom it is unlawful for Medi-Hut to make such offer or solicitation. Neither the delivery of Medi-Hut Co., Inc. this prospectus nor any sale made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of Medi-Hut since the date of this prospectus. 1,850,000 Common Shares __________ TABLE OF CONTENTS Page Prospectus Summary..............................3 Risk Factors....................................4 Use of Proceeds.................................6 Market for Common Equity .......................6 Management's Discussion and Analysis ...........8 Business ......................................13 Property.......................................18 Legal Proceedings..............................18 Management ....................................19 October 29, 2001 Principal Stockholders.........................21 Selling Stockholders ..........................23 Description of Securities .....................23 Plan of Distribution...........................25 Interest of Named Experts and Counsel .........25 Commission Position on Indemnification For Securities Act Liability..................26 Until forty (40) days after Available Additional Information ..............26 the effective date of this Changes In and Disagreements With prospectus all dealers Accountants...................................26 effecting transactions in Index to Financial Statements..................27 the registered securities, whether or not participating in this distribution, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. 50 PART II ITEM 24: INDEMNIFICATION OF DIRECTORS AND OFFICERS Our Articles of Incorporation and bylaws do not provide for indemnification of our directors and officers. However, pursuant to Delaware General Corporate Law Section 145 we must indemnify a present and former director and officer of Medi-Hut who is successful on the merits, or otherwise, in defense of an action or claim. We will indemnify such person for actual and reasonable expenses incurred by such person only if we determine that such indemnification is authorized. Such determination will be based upon whether such person conducted himself in good faith and reasonably believed that his conduct was in, or not opposed to, the our best interests. In a criminal action the person must not have had a reasonable cause to believe his conduct was unlawful. We may advance expenses if the person provides a written affirmation that he will repay the advance if he is adjudged not to have met the standard of conduct. We have purchased director and officer liability insurance for our management which has a $1 million per year policy limit. ITEM 25: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the expenses payable by us in connection with the sale of the shares. All the amounts shown are estimates except for the registration fee: Securities and Exchange Commission Registration Fee............... $ 3,792.50 Printing and Engraving Expenses................................... 500.00 Legal and Accounting Fees and Expenses............................ 9,000.00 Transfer Agent and Registrar Fees and Expenses.................... 250.00 Miscellaneous..................................................... 250.00 ----------- Total $ 13,792.50 ITEM 26: RECENT SALES OF UNREGISTERED SECURITIES The following discussion describes all securities sold by us without registration within the past three years: On January 23, 1998, Indwest issued an aggregate of 1,751,251 common shares to twelve persons for $33,333 in costs paid for or on behalf of Indwest and for services rendered to Indwest in connection with the merger with Medi-Hut, New Jersey. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. On March 2, 1998, we issued warrants to Columbia Financial Group to purchase 200,000 shares of our common stock at an aggregate exercise price of $775,000 in consideration for its public relations services. Such services were valued at $50,500. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. In March 17, 1998, we sold an aggregate of 27,000 common shares for $67,500 to eight persons. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. On June 4, 1998, pursuant to Rule 504 of Regulation D, we sold 500,000 common shares to two accredited persons for $225,000. A 10% commission was paid for this offering. We relied on an exemption from the registration requirements under the Securities Act by reason of Section 3(b) and such offering did not exceed the $1 million aggregate limitation for sales of securities pursuant to Section 3(b) for the prior twelve months. II-1 51 On June 1, 1999, we issued an aggregate of 500,000 warrants to Columbia Financial in consideration for its consulting and investor relations services as our public relations consultant. The warrants are exercisable upon issuance for a period of three years, ending June 1, 2002, with an aggregate exercise price of $437,500. Such services were valued at $26,625. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. On August 4, 1999, we offered an aggregate of 2,200,000 common shares for $1,000,000 pursuant to Rule 504 of Regulation D. Five accredited investors purchased 2,200,000 common shares for the $1 million aggregate offering price A 10% commission was paid for this offering. We relied on an exemption from the registration requirements under the Securities Act by reason of Section 3(b) and such offering did not exceed the $1 million aggregate limitation for sales of securities pursuant to Section 3(b) for the prior twelve months. On March 14, 2000, we issued 7,000 common shares to John E. Strydesky for consulting services valued at $34,792.50. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. On April 4, 2000, we agreed to issue 350,000 common shares valued at $1,340,500 to Lawrence Marasco in exchange for the one outstanding share of Vallar Consulting. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. On October 1, 2000, we issued warrants to purchase 600,000 common shares to Columbia Financial in consideration for its consulting and investor relations services as our public relations consultant. The warrants were valued at $2,041,000. The warrants are exercisable upon issuance for a period of five years, ending October 1, 2005, with an exercise price of $5.00. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. On October 18, 2000, we granted warrants to purchase 100,000 common shares to John Clayton in consideration for his consulting services rendered to us for development of a business and management plan. Such services were valued at $109,000. The warrants had an exercise price of $3.00 for a period of three years, ending October 18, 2003. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. On November 30, 2000, we agreed to sell, in a private placement, 475,000 units for $1,995,000 to Mid-West First Financial, Inc., an accredited investor. Each unit consists of one common share and one warrant to purchase one common share. The warrants are exercisable for a period of five years at an exercise price of $5.25. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. On January 5, 2001, we issued 4,000 common shares valued at $18,000 to Don Mayer, President of Universal Business Insurance, in consideration for directors and officers liability insurance provided to us. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. On February 1, 2001, we sold 475,000 units to Mid-West First Financial, Inc., an accredited investor, for $1,995,000 pursuant to a private placement agreement dated November 30, 2000. Each unit consisted of one common share and one warrant to purchase one common share. The warrants are exercisable for a period of five years at an exercise price of $5.25. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. Beginning on September 7, 2001, we conducted a private placement of our common stock to qualified purchasers pursuant to Rule 505 of Regulation D of the Securities Act. The maximum offering was 1,000,000 common shares at $5.75 per share with potential proceeds of $5,750,000. On October 19, 2001, we terminated II-2 52 the offering after we had sold an aggregate of 275,000 shares to six accredited investors and one purchaser for $1,581,250. We relied on an exemption from the registration requirements under the Securities Act by reason of Section 3(b) and such offering did not exceed the $5 million aggregate limitation for sales of securities pursuant to Section 3(b) for the prior twelve months. On October 5, 2001, we agreed to sell 600,000 units to Empire Fund Managers LLC for $3,180,000. Each unit consisted of one common share and a warrant to purchase an additional common share at $6.75. We relied on an exemption from registration for a private transaction not involving a public distribution provided by Section 4(2) under the Securities Act. In each of the private transactions above we believe that each purchaser either had unrestricted access to detailed material information regarding our operations due to personal relationships or was provided the same kind of information regarding our operations as would be available in a registration statement. We believe each possessed sufficient sophistication to evaluate the information provided and was able to bear the economic risk of the purchase. Also, we believe each purchaser (i) was aware that the securities had not been registered under federal securities laws; (ii) acquired the securities for his/her/its own account for investment purposes of the federal securities laws; (iii) understood that the securities would need to be indefinitely held unless registered or an exemption from registration applied to a proposed disposition; and (iv) was aware that the certificate representing the securities would bear a legend restricting its transfer. We believe that, in light of the foregoing, the sale of our securities to the respective acquirers did not constitute the sale of an unregistered security in violation of the federal securities laws and regulations by reason of the exemptions provided under 4(2) of the Securities Act, and the rules and regulations promulgated thereunder. ITEM 27: EXHIBITS EXHIBITS Exhibit Number Description 2.1 Agreement and Plan of Reorganization between Medi-Hut and Vallar Consulting, dated January 10, 2000. (Incorporated by reference to Medi-Hut's 10-KSB, as amended, filed January 26, 2000) 3.1 Articles of Incorporation of Medi-Hut as amended 3.2 Bylaws of Medi-Hut (Incorporated by reference to exhibit 3.4 to Medi-Hut's Form 10-SB as amended, file No. 0-27119, filed August 23, 1999) 5.1 Opinion of Cindy Shy, P.C. 10.1 Lease between Medi-Hut and Stamos & Sommers, LLC, dated December 12, 1997 (Incorporated by reference to exhibit 10.1 to Medi-Hut's Form 10-SB as amended, file No. 0-27119, filed August 23, 1999) 10.2 Form of Confidential Agreement (Incorporated by reference to exhibit 10.2 to Medi-Hut's Form 10-SB as amended, file No. 0-27119, filed August 23, 1999) 10.3 Promissory Note between Medi-Hut and PNC Bank, N.A., dated October 10, 1997 (Incorporated by reference to exhibit 10.3 to Medi-Hut's Form 10-SB as amended, file No. 0-27119, filed August 23, 1999) 10.4 Promissory Note between Medi-Hut and PNC Bank, N.A., dated October 10, 1997 (Incorporated by reference to exhibit 10.4 to Medi-Hut's 10-KSB, as amended, filed January 26, 2000) II-3 53 10.5 Consultant Agreement between Columbia Financial Group and Medi-Hut, dated October 1, 2000 (Incorporated by reference to the Form SB-2, file No. 333-53718, filed January 16, 2001) 10.6 Amendment to Consultant Agreement between Columbia Financial Group and Medi-Hut, dated October 1, 2000 (Incorporated by reference to the Form 10-Q, filed June 4, 2001) 10.7 Registration Rights Agreement between Medi-Hut, Mid-West, Columbia Financial and Mutual Ventures, dated November 30, 2000. (Incorporated by reference to exhibit 10.6 to the Form SB-2, filed January 16, 2001) 10.8 Joint Venture Agreement between Medi-Hut and COA International Industries, Inc., dated November 16, 2000 10.9 Unit Purchase Agreement between Empire Fund Managers, LLC, dated October 5, 2001 10.10 Registration Rights Agreement between Empire Fund Managers, LLC, dated October 5, 2001 23.1 Consent of Rosenberg, Rich, Baker & Berman 23.2 Consent of Cindy Shy, P.C. (See exhibit 5.1) ITEM 28: UNDERTAKINGS Pursuant to Rule 415 the undersigned registrant hereby undertakes to: (1) file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement which will include any prospectus required by Section 10(a)(3) of the Securities Act; reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and include any additional or changed material information on the plan of distribution. (2) For the purpose of determining any liability under the Securities Act, to treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against these liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by any director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether this indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of this issue. II-4 54 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused the registration statement to be signed on its behalf by the undersigned, duly authorized, in the city of Lakewood, State of New Jersey. MEDI-HUT CO., INC. By: /s/ Joseph Sanpietro Date: 10-30-01 __________________________________________________ Joseph A. Sanpietro, President, CEO and Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Joseph A. Sanpietro and Vincent J. Sanpietro, and each of them, his attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him in any and all capacities, to sign any and all amendments (including post effective amendments) to this registration statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully as to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, the registration statement has been signed by the following persons in the capacities and on the dates indicated. /s/ Joseph A Sanpietro By:_________________________________________________ Date: 10-30-01 Joseph A. Sanpietro, President, CEO and Director /s/ Vincent J. Sanpietro By: ________________________________________________ Date: 10-30-01 Vincent J. Sanpietro, Secretary and Director /s/ Robert Russo By:_________________________________________________ Date: 10/30/01 Robert Russo, Treasurer and Director /s/ Laurence M. Simon By:_________________________________________________ Date: 10/29/01 Laurence M. Simon, Chief Financial Officer /s/ James G. Aaron By:_________________________________________________ Date: 10/30/01 James G. Aaron, Director /s/ James S. Vaccaro By:_________________________________________________ Date: 10/29/01 James S. Vaccaro, Director II-5 EX-3.1 3 medex31.txt ARTICLES OF INCORPORATION, AS AMENDED Exhibit 3.1 CERTIFICATE OF INCORPORATION AS AMENDED OF MEDI-HUT CO., INC. First. The name of this corporation shall be: Medi-Hut Co., Inc. Second. Its registered office in the State of Delaware is to be located at 1013 Centre Road, in the City of Wilmington, County of New Castle, 19805, and its registered agent at such address is The Company Corporation. Third. The purpose or purposes of the corporation shall be: To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. Fourth. The total number of shares of stock which this corporation is authorized to issue is: One Hundred Million (100,000,000) shares at a par value of $0.001 each, amounting to One Hundred Thousand Dollars Fifth. The name and mailing address of the incorporator is as follows: Debra M. Carll Corporate Agents, Inc. 1013 Centre Road Wilmington, DE 19805 Sixth. The Board of Directors shall have the power to adopt, amend or repeal the by-laws. EX-5.1 4 medex51.txt OPINION OF CINDY SHY, P.C. Exhibit 5.1 CINDY SHY, P.C. --------------------------------------------------------------------------- A PROFESSIONAL CORPORATION October 29, 2001 Medi-Hut Co., Inc. 1935 Swarthmore Avenue Lakewood, New Jersey 08701 Re: Medi-Hut, Inc. Registration Statement on Form SB-2 To be filed on or about October 31, 2001 Medi-Hut, Co., Inc.: We are acting as counsel to Medi-Hut, Inc., a Delaware corporation (the "Company"), in connection with the preparation of the above-referenced registration statement on Form SB-2 (the "Registration Statement"), filed by the Company with the Securities and Exchange Commission (the "Commission") on or about October 31, 2001. The Registration Statement relates to the registration, under the Securities Act of 1933, as amended (the "Act"), of 1,850,000 common shares, par value $0.001, previously issued or to be issued by the Company. Capitalized terms used herein and not otherwise defined have the meanings given to them in the Registration Statement. This opinion is delivered in accordance with the requirements of Item 601(b)(5) of Regulation S-B promulgated under the Act. In connection with this opinion, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of (i) the Articles of Incorporation of the Company; (ii) certain resolutions and written consents of the Board of Directors of the Company relating to the issuance and registration of the shares (iii) the Registration Statement, and (iv) such other documents as we have deemed necessary or appropriate as the basis for the opinions set forth below. In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. As to any facts material to this opinion which we did not independently establish or verify, we have relied upon statements and representations of officers and other representatives of the Company and others. Members of our firm are admitted to the practice of law in the State of Utah, and we express no opinion as to the laws of any other jurisdiction. Based on and subject to the foregoing, we are of the opinion that the 600,000 common shares to be issued by the Company upon exercise of the warrants, and paid for upon such exercise, will be duly authorized and validly issued, and fully paid and non-assessable. ______________________________________________________________________________ 525 South 300 East * Salt Lake City, Utah 84111 * (801) 323-2392 Medi-Hut, Inc. October 29, 2001 Page 2 We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement. We also consent to the reference to our firm under the caption "Interest of Experts and Counsel" in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission. Sincerely, /s/ Cindy Shy P.C. Cindy Shy, P.C. EX-10.8 5 medex108.txt JOINT VENTURE AGREEMENT, DATED NOVEMBER 16, 2000 Exhibit 10.8 JOINTVENTURE AGREEMENT This Agreement is entered into on this 16th day of November 2000 BY AND BETWEEN (1) Medi-Hut Co., Inc., a corporation organized and existing under the laws of the United States of Amercia with its registered office at 1935 Swarthmore Avenue, Lakewood, NJ 08701, U.S.A.(hereinafter referred to as "Medi-Hut") AND (2) Coa International Ind., Inc.,. a corporation organized and existing under the laws of the Republic of Korea with its registered office at 6th Floor Sam Won Bldg., 210-1 Nonhyun-Dong Kangnam-Ku, Seoul, Korea (hereinafter referred to as "Coa" WITNESSETH Whereas, Coa is engaged in the business of Exporting and Manufacturing of Medical Disposable Products including Disposable Syringes by a subcontract in Korea. Whereas, Medi-Hut is engaged in the business of Development and Sale of Safety Syringes in U.S.A; and Whereas the Parties agree to set up a Joint Venture Company ("the Company") in Korea on the terms and conditions set out hereunder. Now therefore, in consideration of the mutual promises contained herein, the parties agree as follows: Article 1. ORGANIZATION OF JOINT VENTURE COMPANY 1.1 Subject to the terms and conditions set forth in this Agreement, Medi-Hut and Coa shall cause the Joint Venture Company (hereinafter referred to as the "Company") to be established as a business corporation under the laws of Korea by the target date of 30 November 2000. 1-2 The Company shall (a) be called "Medi-Hut International (Mfg.) Co., Ltd." (b) have its principal office and factory in Korea. 1-3 The business purposes of the Company shall be to engage in manufacture and sale of and any and all business activities incidental to the foregoing objectives. 1-4 The fiscal year of the Company shall first day of January and end on December of each year; provided, however, that the first fiscal year of the Company shall be from the date of its incorporation until December 31 of the same year. Article 2. CAPITAL CONTRIBUTION AND SHARES 2-1 The total amount of capital contribution which shall be made to the Company by the parties shall be as follows; 1 MEDI-HUT: U$1,000,000.00 COA : U$400,000.00 The Company shall grant 10% of share of stock of the Company to Inben Brothers Company, a corporation organized and existing under the laws of the United States of America (hereinafter referred to as the "INBEN") who has been and will act as coordinator-negotiator and agent for both parties. The number of share of stock of the Company to be issued to each party, and the ratio of the equity interest in the Company of each party shall be as follows: MEDI-HUT : 44,000 shares 44% COA : 46,000 shares 46% INBEN : 10,000 shares 10% At the time of incorporation the parties shall contribute the initial capital of U$1,400,000.00, according to the ratio as prescribed in this provision. At the time of incorporation each party has the right to nominate their representative(s) who has and hold the share of stock of the Company in proportion to their respective shareholding ration in the Company. 2-2 At the time of incorporation, the total number of shares set forth in article 2-1 shall be fully subscribed for by Medi-Hut and Coa, respectively and the total investment amount under Article 2.1 shall be paid by the parties hereto in Korean Won or U.S. Dollars and in cash to Korean Bank which will be appointed for the account of the Company. 2-3 Medi-Hut and Coa, as shareholders of the Company, shall have preemptive rights to subscribe to any additional shares, options, warrants or debentures convertible into such shares as the Company may issue after its incorporation, in proportion to their then current respective shareholding ration in the Company. 2-4 The Company shall lend the necessary funds of approximately U.S.$1,461,100 or more or less to cover the lack of amount between initial capital and total investment amount of the new manufacturing facility. Article 3. TRANSFER OF SHARES 3-1 Except as otherwise provided in this Agreement, neither Medi-Hut nor Coa shall at any time sell, transfer, mortgage, pledge, or otherwise encumber or dispose of any of the shares of the Company held by it, without prior written consent of the other party hereto. 3-2 If any party desires to sell, transfer or otherwise dispose of any of its shares in the Company (the "Offeror"), the Offeror shall first offer in writing to sell such shares to the other party (the "Offeree"). Such offer shall state the suggested purchase price per share and the Offeree shall have the right to accept or refuse the offer with the thirty (30) day period commencing on the date of receipt of such offer. 3-3 If the Offeree gives the Offeror written notice within the above period of its desire to purchase the shares so offered, such shares shall be divided among the Offeree in proportion to their shareholdings. 2 3-4 If, after an offer has been made pursuant to Article 3.2, the Offeree refuses or fails to accept such offer, the Offeror may sell, transfer or otherwise dispose of the shares so offered to any third party, provided, however, that the terms and conditions of the offer shall not be more favorable than those offered to the Offeree. 3-5 The third party shall submit to the other party of this Agreement and to the Company a written oath stating that the third party agrees to be governed by all of the terms and provisions of this Agreement and to be fully bound by the terms thereof, assuming all obligations of the party from which it has purchased the shares. 3-6 Any of shares of the Company held by Inben shall be prohibited to sell, transfer, mortgage or pledge without prior written consent of all parties. 3-7 Any share transfer under this Article shall be subject to any necessary governmental validation or approval. Article 4. MANAGEMENT OF JVC 4-1 The following matters with respect to operation and/or management of the Company shall require prior written agreement between Medi-Hut and Coa as follows: (1) Increase or decrease in capital ; (2) Issuance of new shares or debentures ; (2) Borrowing funds other than those for working capital and equipment investment ; (4) Merger, consolidation or amalgamation with any other company ; (5) Dissolution or liquidation ; (6) Sale, transfer or any other disposal of all or substantially part of the assets or business of the Company in consideration for an amount of one hundred thousand (100,000) U.S. Dollars or more ; (7) Acquisition or lease of substantial assets or business of any other company in consideration for an amount of one hundred thousand (100,000) U.S. Dollars or more ; (8) Investment in property, plant, equipment or other facilities in an amount of two hundred thousand (200,000) U.S. Dollars or more; (9) Commencement of business other than that provided for in Article 1.2 hereof, or investment in such business ; 4-2 The Company shall have 3 members of board of directors or more and 1 auditor, they shall be nominated by Coa. 4-3 The Company shall appoint Mr. Joseph A. Sanpietro of Medi-Hut as Chairman. Also, the Company shall appoint Mr. Young Kil Shin as President/C.E.O. and Representative directors who shall be authorized to represent the Company. 4-4 A quorum for any meeting of the Board of Directors shall be a majority of all directors then in office, and resolutions of the Board of Directors shall be adopted by the affirmative vote of a majority of all directors then in office ; provided, however, that a notice calling a meeting of the Board of Directors setting forth the agenda of such meeting shall be dispatched to each director and auditor in accordance with the Articles of Incorporation, and resolutions shall not be made with respect to matters other than those appearing on such agenda, unless all directors, whether present or not, unanimously agree to do 3 otherwise. 4-5 Both parties understood that Coa has been engaged in the export business of Disposable Syringes and Coa has purchased the goods for their export from other Korean manufacturers of Disposable Syringes. Once the Company set up the manufacturing facility, entire quantity of Coa's orders shall be executed by the Company and further, Coa shall transfer their orders to the Company gradually. Article 5. FINANCING 5-1 The Company shall raise and procure funds necessary for its business operations by itself. If necessary, Medi-Hut and Coa shall consult with each other as to appropriate assistance. 5-2 The Company shall lend the necessary funds of approximately U.S.$1,461,100 or more or less to cover the lack of amount between initial capital and total investment amount for the new manufacturing facility. Total amount for the new manufacturing facility - initial capital and loan, shall be used to procure the items/facilities of the Company such as ; Factory building, Molds & Assembly M/C, Packing Machines, Sterilizers, Operation cost and Factory building repairing costs etc. Article 6. DIVIDENDS The Company, depending upon the results of each fiscal year's settlement of accounts, shall make periodic payments of dividends to the shareholders according to the Articles of Incorporation. Article 7. ACCOUNTING AND REPORTS 7-1 The Company's accounting matters shall be conducted in accordance with generally accepted accounting standards and practices under the Korean laws, and shall conform to internationally accepted accounting standards and practices. 7-2 The Company shall keep accurate accounting books and records with regard to all of its operations and activities on a timely basis. Medi-Hut or Coa shall have the right to inspect such books and records during the regular business hours of the Company. 7-3 The annual financial statements shall be audited at the expense of the Company at least once each year by a independent certified public accountants, who shall be of international repute and shall have been appointed by the Board of Directors of the Company. 7-4 Quarterly business reports shall be made by the Company to Medi-Hut and Coa in a form and at such dates as are mutually acceptable to the parties. Whenever Medi-Hut or Coa so requests, the Company shall furnish a report of its business operations to the requesting party. Article 8. TERM AND TERMINATION 8-1 This Agreement shall become effective as of the later of (1) the date of this Agreement or (2) the date upon which any governmental validations, approvals or other formalities necessary for the 4 effectuation of this Agreement under the Korean law shall have been obtained and completed, and shall remain in force and effect until terminated in accordance with the terms and provisions hereof. 8-2 Unless otherwise agreed upon by Medi-Hut and Coa, this Agreement shall forthwith terminate upon the occurrence of any of the following: should governmental validations or approvals necessary for the incorporation of the Company not be obtained within Two (2) months after the date of contribution of the Medi-Hut's full capital ; should the Company not be able to commence its business by reason of operation of law, governmental order or regulation ; or should the Company be dissolved and liquidated for any reason. 8-3 In addition, this Agreement may be terminated as follows: (1) If either party hereto shall default or cause the company to default in the performance of its material obligations hereunder, and if any such default shall not be corrected within sixty (60) days after the same shall have been called to the attention of the defaulting party by the complaining party by written notice, then the complaining party, at its option, may thereupon terminate this Agreement, (2) If either party hereto shall institute or otherwise become a party, voluntarily or involuntarily, to a proceeding alleging or pertaining to the bankruptcy or insolvency of such party, be placed in the hands of a receiver, transfer all or material proportion of its business or assets to, or be acquired by, merge into or be consolidated with another company, the other party hereto may terminate this Agreement. Article 9. EFFECT OF TERMINATION 9-1 Upon termination of this Agreement pursuant to Paragraph (1), (2) of Article 8-2, the Company shall be dissolved and liquidated. 9-2 Upon termination of this Agreement pursuant to Paragraph (1) or (2) of Article 8-3, the terminating party shall have the right to elect (?) To dissolve and liquidate the Company, (?) to purchase or have a third party of its choosing purchase all or any part of the shares in the Company then held by the other party. 9-3 Termination of this Agreement for any cause shall not (?) relieve either party hereto from any obligation accrued hereunder prior to such termination or from any liability to the other party for breach of this Agreement, and (?) affect the confidentiality obligations under Article 11 and the terms and conditions set forth in this Article. Article 10. FORCE MAJEURE Neither party shall be liable for any delay in or failure of performance under this Agreement if such delay or failure is caused by acts of God, riots, war, strikes or other labor troubles, or any other events beyond the control of the parties affected. 5 Article 11. CONFIDENTIALITY The parties hereto agree to keep secret and confidential all information furnished to them by the other party or the Company which are designated as confidential by said other party of the Company, or considered desirable to remain secret. The parties further agree not to use such information for any purpose whatsoever except in a manner expressly provided for in this Agreement. Article 12. ASSIGNMENT Neither party shall assign or transfer this agreement or any rights and obligations under this Agreement to any third party, without prior written consent of the other party hereto. Article 13. GOVERNING LAW AND LANGUAGE This Agreement shall be governed by and interpreted in accordance with the laws of Korea. This Agreement has been prepared in the English language that shall be the controlling version regardless of any translations of this Agreement. Article 14. DISPUTE SETTLEMENT All disputes, controversies or differences which may arise between the parties, out of or in relation to or in connection with this Agreement, or for the breach thereof shall be finally settled by arbitration in Seoul, Korea in accordance with the Commercial Arbitration Rules of the Korean Commercial Arbitration Board and under the laws of Korea. The aware rendered by the arbitrator(s) shall be final and binding upon both parties concerned. Article 15. NOTICE Any notice or other communication required or permitted to be given under this Agreement shall be in writing in English, and shall be delivered personally or sent by registered airmail or by telex or facsimile transmission confirmed by registered airmail, postage prepaid, and, in the case of registered airmail, shall be deemed to have given ten (10) days after posting in the U.S.A or Korean mails and, in the case of telex or facsimile transmission, at the time of transmission. Notices or other communications under this Agreement shall be sent to the following addresses ; provided, however, that each party may, from time to time, change the address to which notice is to b e sent to such party by giving notice of such change in accordance with this provision : To Medi-Hut Co., Inc.: Attention : Mr. Joseph Sanpietro Address : 1935 Swarthmore Avenue, Lakewood, NJ 08701, U.S.A. Facsimile : (732) 901-1177 To Coa International Ind., Inc.: 6 Attention : Mr. Young Kil Shin Address : 6th Floor Samwon Bldg., 210-1 Nonhyun-Dong, Kangnam-Ku, Seoul, Korea : Facsimile : (02) 562-9406 To Inben Brother Company Attention : Mr. Duck S. Yim Address : 5250 N. Leamington Ave., Chicago, IL 60630, U.S.A. Facsimile : (773) 286-5424 Article 16. MISCELLANEOUS 16-1 No failure or delay on the part of Medi-Hut or Coa to exercise any of its rights under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by Medi-Hut or Coa of any of its rights under this Agreement preclude any other or future exercise of such right or the exercise of any other right. 16-2 Any amendment or supplement to this Agreement shall be valid only if made in writing and signed by the authorized representatives of the parties hereto. 16-3 In the event that any term, condition, provision or paragraph of this Agreement is held to be in violation of any law, statute or regulation pertaining thereto, the same shall be deemed deleted from this Agreement and shall be of no force and effect, and this Agreement shall remain in full force and effect, and this Agreement shall remain in full force and effect as if such term, condition. 16-4 The terms and conditions hereof shall constitute the entire agreement between the parties hereto and shall supersede all previous understandings, oral or written agreement, between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this Agreement on the date first written herein above. For and on behalf of For and on behalf of Medi-Hut Co., Inc. Coa International Ind., Inc. /s/ Joseph Sanpietro /s/ Young Kil Shin ______________________________ _____________________________ Date : 11/16/00 Date : 16 Nov 2000 Name : Mr. Jeseph Sanpietro Name : Mr. Young Kil Shin Title : President Title : President Witness Inben Brothers Company /s/ Duck S. Yim __________________________________ Date : 11/15/00 Name : Mr. Duck S. Yim Title : President EX-10.9 6 medex109.txt UNIT PURCHASE AGREEMENT, DATED OCTOBER 5, 2001 Exhibit 10.9 UNIT PURCHASE AGREEMENT ----------------------- THIS UNIT PURCHASE AGREEMENT, dated as of October 5, 2001 (the "Agreement") between Medi-Hut Co., Inc., a Delaware corporation with offices at 1935 Swarthmore Avenue, Lakewood, New Jersey 08701 (the "Company") and Empire Fund Managers (collectively referred to as the "Investors"). RECITALS WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to the Investors, and the Investors shall purchase up to 600,000 Units (as defined below) (the "Units"). WHEREAS, the investment will be made in reliance upon the provisions of Section 4(2) and Regulation D of the United States Securities Act of 1933, as amended, and the regulations promulgated thereunder, and/or upon such other exemptions from the registration requirements of the Securities Act as may be available with respect to any and all of the investments to be made hereunder. NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I Certain Definitions ------------------- Section 1.1 "Capital Shares" shall mean the Common Stock and any shares of any other class of Common Stock whether now or hereafter authorized, having the right to participate in the distribution of earnings and assets of the Company. Section 1.2 "Capital Shares Equivalents" shall mean any securities, rights, or obligations that are convertible into or exchangeable for, or giving any right to, subscribe for any Capital Shares of the Company or any warrants, options or other rights to subscribe for or purchase Capital Shares or any such convertible or exchangeable securities. Section 1.3 "Closing" shall mean one of the closings of the purchase and sale of the Units pursuant to Article II below. Section 1.4 "Closing Date" shall mean the date of the closing of the purchase and sale of the Units pursuant to Article II below. Section 1.5 "Common Stock" shall mean the Company's common stock, $0.001 par value per share. Section 1.6 "Damages" shall mean any loss, claim, damage, liability, costs and expenses which shall include, but not be limited to, reasonable attorney's fees, disbursements, costs and expenses of expert witnesses and investigation. Section 1.7 "Effective Date" shall mean the date on which the SEC first declares effective the Registration Statement. Section 1.8 "Escrow Agent" shall mean the law firm of Daniel W. Jackson, Esq. pursuant to the terms of the Escrow Agreement attached as Exhibit B. Section 1.9 "Exchange Act" shall mean the Securities Exchange Act of 1933, as amended, and the rules and regulations promulgated thereunder. Section 1.10 "Legend" shall have the meaning set forth in Article VIII below. Section 1.11 "Material Adverse Effect" shall mean any effect on the business, operations, properties, earnings, prospects, Bid Price, trading volume of the Common Stock, or financial condition of the Company that is material and adverse to the Company and its subsidiaries and affiliates, taken as a whole, and/or any condition, circumstance, or situation that would prohibit or otherwise in any material respect interfere with the ability of the Company to enter into and perform any of its obligations under this Agreement, the Registration Rights Agreement and the Escrow Agreement. Section 1.12 "NASD" shall mean the National Association of Securities Dealers, Inc. Section 1.13 "Outstanding" when used with reference to shares of Common Stock, or Capital Shares (collectively the "Shares"), shall mean, at any date as of which the number of such Shares is to be determined, all issued and outstanding Shares, and shall include all such Shares issuable in respect of outstanding scrip or any certificates representing fractional interests in such Shares; provided, however, that Outstanding shall not mean any such Shares then directly or indirectly owned or held by or for the account of the Company. Section 1.14 "Person" shall mean an individual, a corporation, a partnership, an association, a limited liability company, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. Section 1.15 "Principal Market" shall mean the OTC Bulletin Board, Nasdaq National Market, the Nasdaq Small Cap Stock Market, the American Stock Exchange, or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock. 2 Section 1.16 "Registrable Securities" shall have the definition set forth in the Registration Rights Agreement. Section 1.17 "Registration Rights Agreement" shall mean the agreement regarding the filing of the Registration Statement for the resale of the Registrable Securities, entered into between the Company, and the Investors and annexed hereto as Exhibit C. Section 1.18 "Registration Statement" shall mean a registration statement on Form SB-2, for the registration of the resale by the Investors of the Registrable Securities under the Securities Act. Section 1.19 "Regulation D" shall have the meaning set forth in the recitals of this Agreement. Section 1.20 "SEC" shall mean the Securities and Exchange Commission. Section 1.21 "Section 4(2)" shall have the meaning set forth in the recitals of this Agreement. Section 1.22 "Securities Act" shall have the meaning set forth in the recitals of this Agreement. Section 1.23 "Warrant" shall mean the Common Stock Purchase Warrant annexed hereto as Exhibit D. Section 1.24 "Warrants" shall mean collectively the Warrant. Section 1.25 "Warrant Shares" shall mean all shares of Common Stock or other securities issued or issuable pursuant to the exercise of the Warrants. ARTICLE II Purchase and Sale of Stock and Warrants ---------------------------------------- Section 2.1 Closings. The Company will sell, and the Investors will buy, on the Closing Date 600,000 Units at a per unit price of $5.32. Section 2.2 Form of Payment. The Investors shall pay the Purchase Price by delivering good funds in United States Dollars by wire transfer to the Escrow Agent, against delivery of the original shares of Stock and Warrants. The parties have entered into an Escrow Agreement annexed hereto as Exhibit B. Section 2.3 Wire Instructions. Wire instructions for the Escrow Agent can be obtained from the office of Daniel W. Jackson, Esq. at: (801) 596-8338. 3 Section 2.4 Units. Each Unit is comprised of one share of the Company's common stock, and one Common Stock Purchase Warrant which shall be exercisable beginning on the Closing Date and extending for a two year period thereafter and shall grant to the investor or holder thereof the right to purchase one additional share of the Company's common stock at a price of $6.75 per share. The common share and warrants shall be delivered by the Company to the Escrow Agent and delivered to the Investor pursuant to the terms of this Agreement and the Escrow Agreement. The common share and the warrant share shall be registered for resale pursuant to the Registration Rights Agreement. Section 2.5 Closings. The closings are as follows: (i) Acceptance by the Investor of this Purchase Agreement and due execution by all parties of this Agreement and the Exhibits annexed hereto; (ii) Delivery into escrow by the Company of the original Initial Shares, original Warrant as more fully set forth in the Escrow Agreement attached hereto; (iii) Delivery into escrow by the Investors of the Purchase Price as set forth in the Escrow Agreement annexed hereto; (iv) All representations, covenants, and warranties of the Company contained herein shall remain true and correct in all material respects as of Closing Date; 4 ARTICLE III Representations and Warranties of the Investors ------------------------------------------------ The Investor represents and warrants to the Company that: Section 3.1 Intent. The Investor is entering into this Agreement for its own account and has no present arrangement (whether or not legally binding) at any time to sell the Common Stock to, or through any person or entity; provided, however, that by making the representations herein, the Investor does not agree to hold the Common Stock for any minimum or other specific term and reserves the right to dispose of the Common Stock at any time in accordance with federal and state securities laws applicable to such disposition. Section 3.2 Sophisticated Investors. The Investors are sophisticated investors (as described in Rule 506(b)(2)(ii) of Regulation D) and a accredited investor (as defined in Rule 501 of Regulation D), and have such experience in business and financial matters that they are capable of evaluating the merits and risks of an investment in the Units. The Investors acknowledge that an investment in the Common Stock is speculative and involves a high degree of risk. Section 3.3 Authority. This Agreement has been duly authorized and validly executed and delivered by the Investors and is a valid and binding agreement of the Investor enforceable against each of it in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Section 3.4 Not an Affiliate. The Investors are not officers, directors or "affiliates" (as that term is defined in Rule 405 of the Securities Act) of the Company. Section 3.5 Organization and Standing. The Investors are duly organized, validly existing, and in good standing under the laws of the countries and/or states of their incorporation or organization. Section 3.6 Absence of Conflicts. The execution and delivery of this Agreement and any other document or instrument executed in connection herewith, and the consummation of the transactions contemplated thereby, and compliance with the requirements thereof, will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Investors, or, to the Investors knowledge, (a) violate any provision of any indenture, instrument or agreement to which the Investor is a party or is subject, or by which the Investors or any of their assets is bound; (b) conflict with or constitute a material default thereunder; (c) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by Investors to any third party; or (d) require the approval of any third-party (which has not been obtained) pursuant to any material contract, agreement, instrument, relationship or legal obligation to which the Investors are subject or to which any of their assets, operations or management may be subject. 5 Section 3.7 Disclosure; Access to Information. The Investors have received all documents, records, books and other information pertaining to Investors' investment in the Company that have been requested by Investors, including the opportunity to ask questions and receive answers. The Investors have reviewed or received copies of any such reports that have been requested by it. The Investors represent that they have reviewed the Company Reports. Section 3.8 Manner of Sale. At no time was the Investors presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising. Section 3.9 Registration or Exemption Requirements. The Investors further acknowledges and understands that the Securities may not be transferred, resold or otherwise disposed of except in a transaction registered under the Securities Act and any applicable state securities laws, or unless an exemption from such registration is available. The Investors understand that the certificate(s) evidencing the Common Shares, and Warrants will be imprinted with a legend that prohibits the transfer of these securities unless (i) they are registered or such registration is not required, or (ii) if the transfer is pursuant to an exemption from registration (with no limitations). Section 3.10 No Legal, Tax or Investment Advice. The Investors understand that nothing in this Agreement or any other materials presented to the Investors in connection with the purchase and sale of the Units constitutes legal, tax or investment advice. The Investors have relied on, and have consulted with, such legal, tax and investment advisors as they, in their sole discretion, have deemed necessary or appropriate in connection with their purchase of the Units. ARTICLE IV Representations and Warranties of the Company ---------------------------------------------- The Company represents and warrants to the Investors that: Section 4.1 Organization of the Company. The Company is a corporation duly incorporated and existing in good standing under the laws of the State of Delaware and has all requisite corporate authority to own its properties and to carry on its business as now being conducted except as described in the Company Documents. The Company is duly qualified to do business as a foreign corporation and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not reasonably be expected to have a Material Adverse Effect. Section 4.2 Authority. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement, and all Exhibits annexed hereto, and to issue the Common Shares, Warrants, and Warrant Shares, (ii) the execution, issuance and delivery of this Agreement, and all Exhibits annexed hereto, by the Company and the consummation by it of the transactions contemplated hereby have been 6 duly authorized by all necessary corporate action and requires no further consent or authorization of the Company or its Board of Directors, and (iii) this Agreement, and all Exhibits annexed hereto, have been duly executed and delivered by the Company and constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. Upon their issuance and delivery pursuant to this Agreement, the Common Shares, Warrants and Warrant Shares, will be validly issued, fully paid and nonassessable and will be free of any liens or encumbrances other than those created hereunder or by the actions of the Investor; provided, however, that the Common Shares, Warrants and Warrant Shares, are subject to restrictions on transfer under state and/or federal securities laws. The issuance and sale of the Common Shares, Warrants and Warrant Shares, under will not give rise to any preemptive right or right of first refusal or right of participation on behalf of any person. Section 4.3 Capitalization. The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, $0.001 par value per share, of which approximately 13,183,800 shares are issued and outstanding. All of the outstanding shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and nonassessable. No shares of Common Stock are entitled to preemptive or similar rights. Section 4.4 Common Stock. The Common Stock will be registered pursuant to Section 12(g) of the Exchange Act. The Common Stock is currently listed or quoted on the NASDAQ Small Cap Stock Market under the symbol "MHUT." Section 4.5 Company Documents. The Company has delivered or made available to the Investor true and complete copies of the Company Documents. The Company has not provided to the Investor any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company, but which has not been so disclosed. None of the Company Documents contain any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Company Documents comply as to form in all material respects with applicable accounting requirements. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended. Section 4.6 Valid Issuances. When issued and payment has been made therefor, Common Shares, Warrants and Warrant Shares, sold to the Investors will be duly and validly issued, fully paid, and nonassessable. Neither the issuance of the Common Shares, Warrants and Warrant Shares to the Investors, pursuant to, nor the Company's performance of its 7 obligations under this Agreement, and all Exhibits annexed hereto will (i) result in the creation or imposition by the Company of any liens, charges, claims or other encumbrances upon the securities issued to the Investors, or any of the assets of the Company, or (ii) entitle the holders of Outstanding Capital Shares to preemptive or other rights to subscribe to or acquire the Capital Shares or other securities of the Company. Section 4.7 No General Solicitation or Advertising in Regard to this Transaction. Neither the Company nor any of its affiliates nor any distributor or any person acting on its or their behalf (i) has conducted or will conduct any general solicitation (as that term is used in Rule 502(c) of Regulation D) or general advertising with respect to the Units, or (ii) made any offers or sales of any security or solicited any offers to buy any security under any circumstances that would require registration of the Units under the Securities Act. Section 4.8 Corporate Documents. The Company has furnished or made available to each of the Investors true and correct copies of: (i) the Company's Articles of Incorporation, as amended and in effect on the date hereof; (ii) the Company's by-laws, as amended and in effect on the date hereof (the "By-Laws"); (iii) Form 10 Registration Statement as amended; and (iv) all filings required by the Securities and Exchange Commission up to and including the Company's Form 10-K, dated January 18, 2001; and (V) any or all filings and/or correspondence with government agencies for the calendar year of 2001, including, but not limited to, the Securities and Exchange Commission, National Association of Broker Dealers and any state regulatory agencies. Section 4.9 No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, including without limitation the issuance of the Common Shares, Warrants and Warrant Shares, do not and will not (i) result in a violation of the Company's Articles of Incorporation or By-Laws, or (ii) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture, instrument or any "lock-up" or similar provision of any underwriting or similar agreement to which the Company is a party, or (iii) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate would not reasonably be expected to have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement (including all Exhibits annexed hereto) or to issue and sell the Common Shares, Warrants and Warrant Shares in accordance with the terms hereof; provided that, for purposes of the representation 8 made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of the Investors herein. Section 4.10 No Material Adverse Change. Since September 28, 2001, no Material Adverse Effect has occurred or exists with respect to the Company, except as publicly announced. Section 4.11 Undisclosed Liabilities. Except as listed in the Company Exhibits attached hereto, the Company has no liabilities or obligations which are material, individually or in the aggregate, that are not disclosed in the Company Documents or otherwise publicly announced, other than those set forth in the Company's financial statements or as incurred in the ordinary course of the Company's businesses since February 1998, and which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Section 4.12 Undisclosed Events or Circumstances. Except as listed in the Company Exhibits attached hereto, since September 28, 2001, no event or circumstance has occurred or exists with respect to the Company or its businesses, properties, prospects, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed in the Company Documents. Section 4.13 No Integrated Offering. To the Company's knowledge, neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, other than pursuant to this Agreement or pursuant to the Company's existing employee benefit plan, under circumstances that would cause the offering of the Units pursuant to this Agreement to be integrated with prior or future offerings by the Company for purposes of the Securities Act or any applicable stockholder approval provisions. Section 4.14 Litigation and Other Proceedings. Except as listed in the Company Exhibits attached hereto, there are no lawsuits or proceedings pending or to the knowledge of the Company threatened, against the Company, nor has the Company received any written or oral notice of any such action, suit, proceeding or investigation, which would reasonably be expected to have a Material Adverse Effect. Except as set forth in the Company Documents, no judgment, order, writ, injunction or decree or award has been issued by or, so far as is known by the Company, requested of any court, arbitrator or governmental agency which would be reasonably expected to result in a Material Adverse Effect. Section 4.15 Acknowledgment of Dilution. The Company is aware and acknowledges that issuance of Common Shares, and/or Warrant Shares, may result in dilution of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligation to issue the Common Shares, and Warrant Shares is unconditional and absolute regardless of the effect of any such dilution. 9 Section 4.16 Employee Relations. The Company is not involved in any labor dispute, nor, to the knowledge of the Company, is any such dispute threatened which could reasonably be expected to have a Material Adverse Effect. None of the Company's employees is a member of a union and the Company believes that its relations with its employees are good. Section 4.17 Environmental Laws. The Company is (i) in compliance with any and all foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants and which the Company know is applicable to them ("Environmental Laws"), (ii) has received all permits, licenses or other approvals required under applicable Environmental Laws to conduct its business, and (iii) is in compliance with all terms and conditions of any such permit, license or approval. Section 4.18 Insurance. The Company is insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company is engaged. The Company has no notice to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires, or obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not materially and adversely affect the condition, financial or otherwise, or the earnings, business or operation, of the Company. Section 4.19 Board Approval. The board of directors of the Company has concluded, in its good faith business judgment, that the issuances of the securities of the Company in connection with this Agreement are in the best interests of the Company. Section 4.20 Integration. The Company shall not and shall use its best efforts to ensure that no affiliate shall sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security of the Company that would be integrated with the offer or sale of the Units, in a manner that would require the registration under the Securities Act of the issue, offer or sale of the Units to the Investors. The Units are being offered and sold pursuant to the terms hereunder, are not being offered and sold as part of a previously commenced private placement of securities. Section 4.21 Use of Proceeds. The Company represents that the net proceeds from this offering will be used for funding its ongoing business operations, expand its present manufacturing capabilities and working capital purposes. ARTICLE V Covenants of the Investors --------------------------- Section 5.1 4.99% Limitation. The number of shares of Common Stock which may be acquired by any of the Investors pursuant to the terms of this Agreement shall not exceed the number of such shares which, when aggregated with all other shares of Common 10 Stock then owned by any of the Investors, would result in any of the Investors owning more than 4.99% of the then issued and outstanding Common Stock. ARTICLE VI Covenants of the Company ------------------------- Section 6.1 Registration Rights. The Company shall cause the Registration Rights Agreement to remain in full force and effect so long as any Registrable Securities remain outstanding and the Company shall comply in all material respects with the terms thereof. Section 6.2 Reservation of Common Stock. As of the date hereof, the Company has authorized and reserved and the Company shall continue to reserve and keep available at all times, free of preemptive rights, shares of Common Stock for the purpose of enabling the Company to satisfy any obligation to issue the Common Shares, Warrants and Warrant Shares. The number of shares so reserved shall be increased or decreased to reflect potential increases or decreases in the Common Stock that the Company may thereafter be so obligated to issue by reason of adjustments to the Warrants. Section 6.3 Legends. The Common Shares, Warrants and Warrant Shares, to be issued by the Company pursuant to this Agreement shall be free of legends, except as set forth in Article VIII. Section 6.4 Corporate Existence. The Company will take all steps necessary to preserve and continue the corporate existence of the Company. Section 6.5 Notice of Certain Events Affecting Registration. The Company will immediately notify each of the Investors or their representative within five Business Days after the occurrence of any of the following events in respect of a registration statement or related prospectus in respect of an offering of Registrable Securities: (i) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (the 11 Company shall not be required to notify the Investors in this case in the event such notification would be deemed the release of nonpublic information); and (v) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate. The Company will, within five Business Days of when filed with the SEC make available to the Investors any such supplement or amendment to the related prospectus. Section 6.6 Consolidation; Merger. The Company shall not, at any time after the date hereof, effect any merger or consolidation of the Company with or into, or a transfer of all or substantially all of the assets of the Company to, another entity (a "Consolidation Event") unless the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligation to deliver to the Investors such shares of stock and/or securities as the Investors are entitled to receive pursuant to this Agreement. Section 6.7 Issuance of Common Shares and Warrant Shares. The issuance of the Common Shares and Warrant Shares shall be made in accordance with the provisions and requirements of Section 4(2) of the Securities Act, or Regulation D and any applicable state securities law. Section 6.8 Exercise of Warrants. The Company will permit the Investors to exercise their right to exercise the Warrants, by telecopying an executed and completed Notice of Exercise (along with payment of the applicable Exercise Price) to the Company as is set forth in the Warrant. Section 6.9 Increase in Authorized Shares. At such time as the Company would be, if a notice of exercise were to be delivered on such date, precluded from honoring (i) the exercise in full of the Warrants, due to the unavailability of a sufficient number of shares of authorized but unissued or re-acquired Common Stock, the Board of Directors of the Company shall promptly (and in any case within 30 calendar days from such date) hold a shareholders meeting in which the shareholders would vote for authorization to amend the Company's certificate of incorporation to increase the number of shares of Common Stock which the Company is authorized to issue to at least a number of shares equal to the sum of (i) all shares of Common Stock then outstanding, (ii) the number of shares of Common Stock issuable on account of all outstanding warrants, options and convertible securities (other than the Warrants) and on account of all shares reserved under any stock option, stock purchase, warrant or similar plan, and (iv) such number of Warrant Shares as would then be issuable upon the exercise in full of the Warrants, as would be issuable on such date. In connection therewith, the Board of Directors shall promptly (x) adopt proper resolutions authorizing such increase, (y) recommend to and otherwise use its best efforts to promptly and duly obtain shareholder approval to carry out such resolutions and (z) within five Business Days of obtaining such shareholder authorization, file an appropriate amendment to the Company's certificate of incorporation to evidence such increase. In no way shall the aforementioned be deemed a waiver of the Company's obligations contained in Section 6.2 above. Section 6.10 Notice of Breaches. Each of the Company on the one hand, and the Investors on the other, shall give prompt written notice to the other of any breach by it of any representation, covenant, warranty or other agreement contained in this Agreement or any 12 Exhibit annexed hereto, as well as any events or occurrences arising after the date hereof, which would reasonably be likely to cause any representation, covenant, or warranty or other agreement of such party, as the case may be, contained in this Agreement or any Exhibit annexed hereto, to be incorrect or breached as of such date. However, no disclosure by either party pursuant to this Section shall be deemed to cure any breach of any representation, warranty or other agreement contained in this Agreement or any Exhibit annexed hereto. Notwithstanding the generality of the foregoing, the Company shall promptly notify each Investor of any notice or claim (written or oral) that it receives from any lender of the Company to the effect that the consummation of the transactions contemplated by this Agreement or any Exhibit annexed hereto, violates or would violate any written agreement or understanding between such lender and the Company, and the Company shall promptly furnish by facsimile to each Investor a copy of any written statement in support of or relating to such claim or notice. ARTICLE VII Due Diligence Review; Non-Disclosure of Non-Public Information -------------------------------------------------------------- Section 7.1 Due Diligence Review. The Company shall make available for inspection and review by the Investors, advisors to and representatives of the Investors (who may or may not be affiliated with the Investors), any underwriter participating in any disposition of the Registrable Securities on behalf of the Investors pursuant to the Registration Statement, any such registration statement or amendment or supplement thereto or any blue sky, NASD or other filing, all financial and other records, all Company Documents, and all other corporate documents and properties of the Company as may be reasonably necessary for the purpose of such review, and cause the Company's officers, directors and employees to supply all such information reasonably requested by any of the Investors or any such representative, advisor or underwriter in connection with such Registration Statement (including, without limitation, in response to all questions and other inquiries reasonably made or submitted by any of them), prior to and from time to time after the filing and effectiveness of the Registration Statement for the sole purpose of enabling the Investors and such representatives, advisors and underwriters and their respective accountants and attorneys to conduct initial and ongoing due diligence with respect to the Company and the accuracy of the Registration Statement. Section 7.2 Non-Disclosure of Non-Public Information (a) The Company has not disclosed, and hereafter shall not disclose non-public information to the Investors, advisors to, or representatives of, the Investors unless prior to disclosure of such information the Company identifies such information as being non-public information and provides each Investor, and its advisors and representatives with the opportunity to accept or refuse to accept such non-public information for review. The Company may, as a condition to disclosing any non-public information hereunder, require each of the Investors advisors and representatives to enter into a confidentiality agreement in form reasonably satisfactory to the Company and the Investors. (b) Nothing herein shall require the Company to disclose non-public 13 information to any of the Investors or their advisors or representatives, and the Company represents that it does not disseminate non-public information to any investors who purchase stock in the Company in a public offering, to money managers or to securities analysts, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of the Investors and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section shall be construed to mean that such persons or entities other than the Investors (without the written consent of the Investors prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of a material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading. ARTICLE VIII Legends ------- Section 8.1 Legends. The Investors agree to the imprinting, so long as is required by this Section, of the following legend (or such substantially similar legend as is acceptable to the Investors and their counsel, the parties agreeing that any unacceptable legended securities shall be replaced promptly by and at the Company's cost) on the securities: [FOR WARRANTS AND COMMON SHARES] NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. [ONLY FOR WARRANT SHARES TO THE EXTENT THE RESALE THEREOF IS NOT COVERED BY AN EFFECTIVE REGISTRATION STATEMENT AT THE TIME OF ISSUANCE OR EXERCISE] THE SHARES REPRESENTED BY THIS 14 CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. The Warrant Shares shall not contain the legend set forth above or any other restrictive legend if the issuance of such occurs at any time while a Registration Statement is effective under the Securities Act in connection with the resale of the shares of Common Stock or, in the event there is not an effective Registration Statement at such time, if in the opinion of counsel to the Company such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements issued by the staff of the Commission). The Company agrees that it will provide the Investors, upon request, with a certificate or certificates representing the Warrant Shares, free from such legend at such time as such legend is no longer required hereunder. The Company may not make any notation on its records or give instructions to any transfer agent of the Company which enlarge the restrictions of transfer set forth in this Section. Upon the execution and delivery hereof, the Company is issuing to the transfer agent for its Common Stock (and to any substitute or replacement transfer agent for its Common Stock upon the Company's appointment of any such substitute or replacement transfer agent) instructions in substantially the form of Exhibit E hereto. Such instructions shall be irrevocable by the Company from and after the date hereof or from and after the issuance thereof to any such substitute or replacement transfer agent, as the case may be, except as otherwise expressly provided in the Registration Rights Agreement. It is the intent and purpose of such instructions, as provided therein, to require the transfer agent for the Common Stock from time to time upon transfer of Registrable Securities by the Investors to issue certificates evidencing such Registrable Securities free of the Legend during the following periods and under the following circumstances and except as provided below, without consultation by the transfer agent with the Company or its counsel and without the need for any further advice or instruction or documentation to the transfer agent by or from the Company or its counsel or the Investors: (a) at any time after the Effective Date, upon surrender of one or more certificates evidencing the Warrants or Warrant Shares that bear the aforementioned Legend, to the extent accompanied by a notice requesting the issuance of new certificates free of the aforementioned legend to replace those surrendered; provided that (i) the Registration Statement shall then be effective; (ii) the Investor(s) confirm to the transfer agent that it has sold, pledged or otherwise transferred or agreed to sell, pledge or otherwise transfer such Common Stock in a bona fide transaction to a third party that is not an affiliate of the Company; and (iii) the Investor(s) confirm to the transfer agent that the Investor(s) have complied with the prospectus delivery requirement. 15 (b) at any time upon any surrender of one or more certificates evidencing Registrable Securities, that bear the aforementioned legend, to the extent accompanied by a notice requesting the issuance of new certificates free of such legend to replace those surrendered and containing representations that (i) the Investor(s) is permitted to dispose of such Registrable Securities, without limitation as to amount or manner of sale pursuant to Rule 144(k) under the Securities Act or (ii) the Investor(s) has sold, pledged or otherwise transferred or agreed to sell, pledge or otherwise transfer such Registrable Securities, in a manner other than pursuant to an effective registration statement, to a transferee who will upon such transfer be entitled to freely tradeable securities. The Company shall have counsel provide any and all opinions necessary for the sale under Rule 144, as permitted under applicable law. Any of the notices referred to above in this Section may be sent by facsimile to the Company's transfer agent. Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend other than the one specified in this Article has been or shall be placed on the share certificates representing the Common Stock, and no instructions or "stop transfer orders," so called, "stock transfer restrictions," or other restrictions have been or shall be given to the Company's transfer agent with respect thereto other than as expressly set forth in this Article. Section 8.3 Investor's Compliance. Nothing in this Article shall affect in any way any of the Investors obligations under any agreement to comply with all applicable securities laws upon resale of the Common Stock. ARTICLE IX Choice of Law ------------- Section 9.1 Choice of Law; Venue; Jurisdiction. This Agreement will be construed and enforced in accordance with and governed by the laws of the State of Utah, except for matters arising under the Securities Act, without reference to principles of conflicts of law. Each of the parties consents to the exclusive jurisdiction of the United States District Court for the District of Utah in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. Each party hereby agrees that if another party to this Agreement obtains a judgment against it in such a proceeding, the party which obtained such judgment may enforce same by summary judgment in the courts of any country having jurisdiction over the party against whom such judgment was obtained, and each party hereby waives any defenses available to it under local law and agrees to the enforcement of such a judgment. Each party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law. Each party waives its right to a trial by jury. 16 ARTICLE X Assignment; Entire Agreement, Amendment; Termination ---------------------------------------------------- Section 10.1 Assignment. The Investor's interest in this Agreement and its ownership of Common Stock and Warrants may be assigned or transferred at any time, in whole or in part, to any other person or entity (including any affiliate of the Investors) who agrees to, and truthfully can, make the representations and warranties contained in Article III, and who agrees to be bound by the covenants of Article V. The provisions of this Agreement shall inure to the benefit of, and be enforceable by, any transferee of any of the shares of Common Stock and/or Warrants purchased or acquired by the Investors hereunder with respect to the Common Stock held by such person. Section 10.2 Termination. This Agreement shall terminate upon the earliest of (i) the date that all the Registrable Securities have been sold by the Investors pursuant to the Registration Statement; (ii) the date the Investors receive an opinion from counsel to the Company that all of the Registrable Securities may be sold under the provisions of Rule 144, without volume limitation; or (iii) five years after the Closing Date; provided, however, that the provisions of Articles III, IV, V, VI, VII, VIII, IX, X, XI, and XII herein, and the registration rights provisions for the Registrable Securities held by the Investors set forth in this Agreement, and the Registration Rights Agreement, shall survive the termination of this Agreement. ARTICLE XI Notices -------- Section 11.1 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received), or (b) on the second Business Day following the date of mailing by reputable courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: If to the Company: Medi-Hut Co., Inc. 1935 Swarthmore Avenue Lakewood, New Jersey 08701 17 If to the Investors: See attached "Exhibit A" Either party hereto may from time to time change its address or facsimile number for notices under this Section 11.1 by giving at least ten calendar days' prior written notice of such changed address or facsimile number to the other party hereto. Section 11.2 Indemnification. The Company agrees to indemnify and hold harmless each of the Investors and each officer, director of the Investors or person, if any, who controls the Investors within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees), to which the Investors may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon the breach of any term of this Agreement by the Company. This indemnity agreement will be in addition to any liability which the Company may otherwise have. Each Investor agrees that it will indemnify and hold harmless the Company, and each officer, director of the Company or person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees) to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon the breach of any term of this Agreement by the Investor. This indemnity agreement will be in addition to any liability which the Investors or any subsequent assignee may otherwise have. Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than as to the particular item as to which indemnification is then being sought solely pursuant to this Section. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such 18 counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party; provided that if the indemnified party is one of the Investors, the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, or (ii) the named parties to any such action (including any impleaded parties) include both the Investors and the indemnifying party and the Investors shall have been advised by such counsel that there may be one or more legal defenses available to the indemnifying party in conflict with any legal defenses which may be available to the Investors (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the Investors, it being understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable only for the reasonable fees and expenses of one separate firm of attorneys for the Investor, which firm shall be designated in writing by the Investor). No settlement of any action against an indemnified party shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld. Section 11.3 Contribution. In order to provide for just and equitable contribution under the Securities Act in any case in which (i) the indemnified party makes a claim for indemnification pursuant to Section 11.2 hereof but is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of Section 11.2 hereof provide for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any indemnified party, then the Company and the applicable Investor shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees), in either such case (after contribution from others) on the basis of relative fault as well as any other relevant equitable considerations. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in Section 11.2 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contributions from any person who was not guilty of such fraudulent misrepresentation. 19 ARTICLE XII Miscellaneous ------------- Section 12.1 Counterparts; Facsimile; Amendments. This Agreement may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. Except as otherwise stated herein, in lieu of the original documents, a facsimile transmission or copy of the original documents shall be as effective and enforceable as the original. This Agreement may be amended only by a writing executed by the Company on the one hand, and the Investors, on the other hand. Section 12.2 Entire Agreement. This Agreement, the Exhibits or attachments hereto, which include, but are not limited to the Warrant, the Certificate of Designation, the Escrow Agreement, and the Registration Rights Agreement, set forth the entire agreement and understanding of the parties relating to the subject matter hereof and supersedes all prior and contemporaneous agreements, negotiations and understandings between the parties, both oral and written relating to the subject matter hereof. The terms and conditions of all Exhibits to this Agreement are incorporated herein by this reference and shall constitute part of this Agreement as if fully set forth herein. Section 12.3 Survival; Severability. The representations, warranties, covenants and agreements of the parties hereto shall survive each Closing hereunder. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party. Section 12.4 Title and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. Section 12.5 Reporting Entity for the Common Stock. The reporting entity relied upon for the determination of the trading price or trading volume of the Common Stock on any given Trading Day for the purposes of this Agreement and all Exhibits shall be Yahoo Finance or Bloomberg, L.P. or any successor thereto. The written mutual consent of the Investors and the Company shall be required to employ any other reporting entity. 20 Section 12.6 Replacement of Certificates. Upon (i) receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of a certificate representing the Initial Shares, Secondary Shares, Reset Shares, Warrants, Warrant Shares, or Additional Shares, and (ii) in the case of any such loss, theft or destruction of such certificate, upon delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or (iii) in the case of any such mutilation, on surrender and cancellation of such certificate, the Company at its expense will execute and deliver, in lieu thereof, a new certificate of like tenor. Section 12.7 Fees and Expenses. Each of the parties shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, except that the Company shall pay (i) on the Closing Date $30,000, in cash, out of the escrowed funds, to the Escrow Agent for legal, administrative, and escrow fees. Section 12.8 Publicity. The Company and the Investors shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other parties with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the names of the Investors without the prior written consent of the Investors, except to the extent required by law or in response to a written SEC request, in which case the Company shall provide the Investors with prior written notice of such public disclosure. Exhibits: -------- Schedule of Investors Exhibit A Escrow Agreement Exhibit B Registration Rights Agreement Exhibit C Warrant Agreement Exhibit D Instructions to Transfer Agent Exhibit E [Remainder of page intentionally left blank] [Signature page follows] 21 IN WITNESS WHEREOF, the parties hereto have caused this Unit Purchase Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above. MEDI-HUT CO., INC. /s/ Joseph Sanpietro By _____________________________ Joseph Sanpietro President and CEO EMPIRE FUND MANAGERS By /s/ Jules DeGreef ----------------------------- Its: Manager 22 EX-10.10 7 medex1010.txt REGISTRATION RIGHTS AGREEMENT, DATED OCTOBER 5, 2001 Exhibit 10.10 EXHIBIT C REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT, dated the 5th day of October, 2001, between EMPIRE FUND MANAGERS , (referred to as the "Investors"), and Medi-Hut Co., Inc., a corporation incorporated under the laws of the State of Delaware, and having its principle place of business at 1935 Swarthmore Avenue, Lakewood, New Jersey 08701 (the "Company"). WHEREAS, simultaneously with the execution and delivery of this Agreement and from time to time thereafter, the Investors are purchasing from the Company, pursuant to the Unit Purchase Agreement dated the date hereof (the "Purchase Agreement"), shares of Common Stock and Warrants (hereinafter collectively referred to as the "Securities" of the Company); All capitalized terms not hereinafter defined shall have that meaning assigned to them in the Purchase Agreement; and WHEREAS, the Company desires to grant to the Holders the registration rights set forth herein. NOW, THEREFORE, the parties hereto mutually agree as follows: Section 1. Registrable Securities. As used herein the term "Registrable Security" means the Common Stock of the Company issued under the Purchase Agreement or as the result of the execution of warrants issued under that Agreement or the Consulting Agreement; provided, however, that with respect to any particular Registrable Security, such security shall cease to be a Registrable Security when, as of the date of determination, (i) it has been effectively registered under the Securities Act of 1933, as amended (the "1933 Act") and disposed of pursuant thereto, (ii) registration under the 1933 Act is no longer required for the immediate public distribution of such security as a result of the provisions of Rule 144 promulgated under the 1933 Act, or (iii) it has ceased to be outstanding. The term "Registrable Securities" means any and/or all of the securities falling within the foregoing definition of a Registrable Security. In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be made in the definition of Registrable Security as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Section. Section 2. Restrictions on Transfer. The Holders acknowledge and understand that prior to the registration of the Registrable Securities as provided herein, the Registrable Securities and the Securities are "restricted securities" as defined in Rule 144 promulgated under the Act. The Holders understand that no disposition or transfer of the Registrable Securities or the Securities may be made by the Holders in the absence of (i) an opinion of counsel to the Holders that such transfer may be made without registration under the 1933 Act, or (ii) such registration. Section 3. Registration Rights. (a) The Company agrees that it will prepare and file with the Securities and Exchange Commission ("SEC"), on or prior to November 20, 2001, a registration statement (on Form SB-2, or other appropriate registration statement) under the 1933 Act (the "Registration Statement"), at the sole expense of the Company (except as provided in Section 3(c) hereof), in respect of all holders of Registrable Securities, so as to permit a public offering and sale of the Registrable Securities under the Act. The Company shall use its best efforts to cause the Registration Statement to become effective on or before January 5, 2002. The number of shares of Common Stock designated in the Registration Statement to be registered shall be not less than (i) 100% of the number of Common Shares acquired under the Purchase Agreement, plus (ii) 100% of the number of Warrant Shares issuable assuming all of the Warrants had been issued pursuant to the Purchase Agreement and Consulting Agreement. (b) The Company will maintain the Registration Statement, or post-effective amendment filed under this Section 3 hereof current under the 1933 Act until the earlier of (i) the date that all of the Registrable Securities have been sold pursuant to the applicable Registration Statement, (ii) the date the holders thereof receive an opinion of counsel that the Registrable Securities may be sold under the provisions of Rule 144 (without limitation) or (iii) three years after the Subscription Date. (c) All fees, disbursements and out-of-pocket expenses and costs incurred by the Company in connection with the preparation and filing of the Registration Statement under subparagraph 3(a) and in complying with applicable securities and blue sky laws (including, without limitation, all attorneys' fees) shall be borne by the Company. The Holders shall bear the cost, pro rata, of underwriting discounts and commissions, if any, applicable to the Registrable Securities being registered and the fees and expenses of its counsel. The Company shall qualify any of the securities for sale in such states as such Holder reasonably designates and shall furnish indemnification in the manner provided in Section 6 hereof. The Company at its expense will supply the Holders with copies of the Registration Statement and the prospectus or offering circular included therein and other related documents in such quantities as may be reasonably requested by the Holders. (d) The Company shall not be required by this Section 3 to include a Holder's Registrable Securities in any Registration Statement which is to be filed if, in the opinion of counsel for both the Holder and the Company (or, should they not agree, in the opinion of another counsel experienced in securities law matters acceptable to counsel for the Holder and the Company) the proposed offering or other transfer as to which such registration is requested is exempt from applicable federal and state securities laws and would result in all purchasers or transferees obtaining securities which are not "restricted securities", as defined in Rule 144 under the 1933 Act. (e) In the event the Registration Statement to be filed by the Company pursuant to Section 3(a) above is not filed with the SEC on or before December 5, 2001 and/or the Registration Statement is not declared effective by the SEC on or before January 18, 2002, then the 2 Company will pay the Holders (pro rated on a daily basis), as liquidated damages for such failure and not as a penalty, five percent of the purchase price of the then outstanding Securities for every 15 calendar day period until the Registration Statement has been filed and/or declared effective. Such payment of the liquidated damages shall be made to the Holders in cash, immediately upon demand, provided, however, that the payment of such liquidated damages shall not relieve the Company from its obligations to register the Registrable Securities. If the Company does not remit the damages to the Holder as set forth above, the Company will pay the Holders reasonable costs of collection, including attorneys fees, in addition to the liquidated damages. The registration of the Securities pursuant to this provision shall not affect or limit Holder's other rights or remedies as set forth in this Agreement. (f) The Company agrees that it shall declare the Registration Statement effective within five Business Days after being informed by the SEC that it may do so. The Company also agrees that it shall respond to any questions and/or comments from the SEC which relate to the Registration Statement within five Business Days of receipt of such question or comment. Section 4. Cooperation with Company. Each of the Holders will cooperate with the Company in all respects in connection with this Agreement, including timely supplying all information reasonably requested by the Company and executing and returning all documents reasonably requested in connection with the registration and sale of the Registrable Securities. Section 5. Registration Procedures. If and whenever the Company is required by any of the provisions of this Agreement to effect the registration of any of the Registrable Securities under the Act, the Company shall (except as otherwise provided in this Agreement), as expeditiously as possible: (a) prepare and file with the SEC such amendments and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the Holder shall desire to sell or otherwise dispose of the same (including prospectus supplements with respect to the sales of securities from time to time in connection with a registration statement pursuant to Rule 415 promulgated under the Act); (b) furnish to each Holder such numbers of copies of a summary prospectus or other prospectus, including a preliminary prospectus or any amendment or supplement to any prospectus, in conformity with the requirements of the Act, and such other documents, as such Holder may reasonably request in order to facilitate the public sale or other disposition of the securities owned by such Holder; (c) register and qualify the securities covered by the Registration Statement under such other securities or blue sky laws of such jurisdictions as the Holders shall 3 reasonably request, and do any and all other acts and things which may be necessary or advisable to enable each Holder to consummate the public sale or other disposition in such jurisdiction of the securities owned by such Holder, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or to file therein any general consent to service of process; (d) list such securities on the Principal Market on which any securities of the Company are then listed, if the listing of such securities is then permitted under the rules of such Principal Market; (e) enter into and perform its obligations under an underwriting agreement, if the offering is an underwritten offering, in usual and customary form, with the managing underwriter or underwriters of such underwritten offering; (f) notify each Holder of Registrable Securities covered by the Registration Statement any time when a prospectus relating thereto covered by the Registration Statement is required to be delivered under the Act, and of the happening of any event of which it has knowledge as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. Section 6. Information by Holder. Each Holder of Registrable Securities included in any registration statement shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may request in writing and as shall be required in connection with any registration, qualification or compliance referred to in this Section. Section 7. Assignment. The rights granted the Holders under this Agreement shall not be assigned without the written consent of the Company, which consent shall not be unreasonably withheld. This Agreement is binding upon and inures to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. Section 8. Termination of Registration Rights. The rights granted pursuant to this Agreement shall terminate as to each Holder (and permitted transferee under Section 7 above) upon the occurrence of any of the following: (a) all such Holder's securities subject to this Agreement have been registered; (b) all of such Holder's securities subject to this Agreement may be sold without such registration pursuant to Rule 144 promulgated by the SEC pursuant to the Securities Act; or 4 (c) all of such Holder's securities subject to this Agreement can be sold pursuant to Rule 144(k) without volume limitation. Section 9. Indemnification. (a) In the event of the filing of any Registration Statement with respect to Registrable Securities pursuant to Section 3 hereof, the Company agrees to indemnify and hold harmless the Holders, and each officer, director of the Holders or person, if any, who controls the Holders within the meaning of the Securities Act ("Distributing Holders") against any losses, claims, damages or liabilities, joint or several (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees), to which the Distributing Holders may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any such Registration Statement or any related preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by the Distributing Holders, specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) In the event of the filing of any Registration Statement with respect to Registrable Securities pursuant to Section 3 hereof, each Distributing Holder agrees that it will indemnify and hold harmless the Company, and each officer, director of the Company or person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages or liabilities (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees) to which the Company or any such officer, director or controlling person may become subject under the Securities Act or otherwise, insofar as such losses claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a Registration Statement, requested by such Distributing Holder, or any related preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto, or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement, preliminary prospectus, final prospectus, offering circular, notification or amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company by such Distributing Holder, specifically for use in the preparation thereof and, provided further, that the indemnity agreement contained in this Section 9(b) 5 shall not inure to the benefit of the Company with respect to any person asserting such loss, claim, damage or liability who purchased the Registrable Securities which are the subject thereof if the Company failed to send or give (in violation of the Securities Act or the rules and regulations promulgated thereunder) a copy of the prospectus contained in such Registration Statement to such person at or prior to the written confirmation to such person of the sale of such Registrable Securities, where the Company was obligated to do so under the Securities Act or the rules and regulations promulgated thereunder. This indemnity agreement will be in addition to any liability which the Distributing Holders may otherwise have. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve the indemnifying party from any liability which it may have to any indemnified party otherwise than as to the particular item as to which indemnification is then being sought solely pursuant to this Section. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, assume the defense thereof, subject to the provisions herein stated and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless the indemnifying party shall not pursue the action to its final conclusion. The indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall not be at the expense of the indemnifying party if the indemnifying party has assumed the defense of the action with counsel reasonably satisfactory to the indemnified party; provided that if the indemnified party is the Distributing Holder, the fees and expenses of such counsel shall be at the expense of the indemnifying party if (i) the employment of such counsel has been specifically authorized in writing by the indemnifying party, or (ii) the named parties to any such action (including any impleaded parties) include both the Distributing Holder and the indemnifying party and the Distributing Holder shall have been advised by such counsel that there may be one or more legal defenses available to the indemnifying party different from or in conflict with any legal defenses which may be available to the Distributing Holder (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the Distributing Holder, it being understood, however, that the indemnifying party shall, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable only for the reasonable fees and expenses of one separate firm of attorneys for the Distributing Holder, which firm shall be designated in writing by the Distributing Holder). No settlement of any action against an indemnified party shall be made without the prior written consent of the indemnified party, which consent shall not be unreasonably withheld. 6 Section 10. Contribution. In order to provide for just and equitable contribution under the Securities Act in any case in which (i) the Distributing Holder makes a claim for indemnification pursuant to Section 9 hereof but is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of Section 9 hereof provide for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any Distributing Holder, then the Company and the applicable Distributing Holder shall contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees), in either such case (after contribution from others) on the basis of relative fault as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the applicable Distributing Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Distributing Holder agree that it would not be just and equitable if contribution pursuant to this Section were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this Section. The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this Section shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Section 11. Notices. Any notice pursuant to this Agreement by the Company or by the Holders shall be in writing and shall be deemed to have been duly given if delivered by (i) hand, (ii) by facsimile and followed by mail delivery or (iii) if mailed by certified mail, return receipt requested, postage prepaid, addressed as follows: (a) If to the Company: Medi-Hut Co., Inc. 1935 Swarthmore Avenue Lakewood, New Jersey 08701 Attention: Joseph Sanpietro Telephone: (732) 901-0606 Facsimile: (732) 901-1177 7 (b) If to the Investors: Empire Fund Managers 8380 Melrose Avenue Los Angeles, California Notices shall be deemed given at the time they are delivered personally or five calendar days after they are mailed in the manner set forth above. If notice is delivered by facsimile to the Company and followed by mail, delivery shall be deemed given two calendar days after such facsimile is sent. Section 12. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 13. Headings. The headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 14. Choice of Law; Venue; Jurisdiction. This Agreement will be construed and enforced in accordance with and governed by the laws of the State of Utah, except for matters arising under the Securities Act, without reference to principles of conflicts of law. Each of the parties consents to the jurisdiction of the U.S. District Court sitting in the State of Utah, for the Central District of Utah in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. Each party hereby agrees that if another party to this Agreement obtains a judgment against it in such a proceeding, the party which obtained such judgment may enforce same by summary judgment in the courts of any country having jurisdiction over the party against whom such judgment was obtained, and each party hereby waives any defenses available to it under local law and agrees to the enforcement of such a judgment. Each party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein. Nothing herein shall affect the right of any party to serve process in any other manner permitted by law. Each party waives its right to a trial by jury. Section 15. Severability. If any provision of this Agreement shall for any reason be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof and this Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. [Remainder of Page Intentionally Left Blank] [Signature Page Follows] 8 IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed, on the day and year first above written. MEDI-HUT CO., INC. Attest: /s/ Lawrence M. Simon /s/ Joseph Sanpietro By:_________________________ By:______________________________ Name: Lawrence M. Simon Joseph Sanpietro Title: Chief Financial Officer President and CEO EMPIRE FUND MANAGERS /s/ Jules A DeGreef By____________________________ Name: Jules A. DeGreef Title: Manager 9 EX-23.1 8 medex231.txt CONSENT OF ROSENBERG, RICH BAKER & BERMAN Exhibit 23.1 Rosenberg Rick Baker Berman --------------- & COMPANY --------------- A PROFESSIONAL ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS 390 Foothill Road * P.O. Box 6485 * Bridgewater, NJ 08807 Phone 908-231-1000 * FAX 908-231-6894 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the use in this Registration Statement on Form SB-2 of our report dated December 20, 2000, relating to the financial statements of Medi-Hut Company, Inc. , and to the reference to our Firm under the caption "Experts" in the Prospectus. /s/ Rosenberg Rich Baker Berman & Company Bridgewater, New Jersey October 30, 2001